“If you want to be wealthy, invest, invest and invest.” –Robert Kiyosaki
What is an Investment?
An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth.
Key Takeaways on Defining Investment
- An investment involves putting capital to use today in order to increase its value over time.
- An investment requires putting capital to work, in the form of time, money, effort, etc., in hopes of a greater payoff in the future than what was originally put in.
- An investment can refer to any medium or mechanism used for generating future income, including bonds, stocks, real estate property, or a business, among other examples.
How an Investment Works
The act of investing has the goal of generating income and increasing value over time. An investment can refer to any mechanism used for generating future income. This includes the purchase of real estate property, stocks, bonds, mutual funds, among other examples.
Investment is the best way to build wealth. To get started, focus on the following investment classifications:
- Invest in your own Financial Education—If you want to be rich, you must think, learn, and do what rich people do. Start with videos on YouTube, read books, articles, and hire an investor as a coach.
- Invest in your own Business—start a new business, focus on your passion and profits.
- Invest in Real Estates—join local real estate investment club, classes, and take actions.
- Invest in Commodities—raw materials such as rice, wheat, and other agricultural products—precious metals such as gold and silver—energy resources such as oil, natural gas, and solar energy—mew technologies such as cryptocurrencies and self-drive vehicles.
- Invest in some Paper Assets such as stock, bonds, and mutual funds. You can with trading index funds to get started.
Is there’s a risk in investing?
The short answer is yes. In general, any action that is taken in the hopes of raising future revenue can be considered an investment. For example, when choosing to pursue additional education, the goal is often to increase knowledge and improve skills (in the hopes of ultimately producing more income).
Because investing is oriented toward the potential for future growth or income, there is always a certain level of risk associated with an investment.
An investment may not generate any income or may lose value over time. For example, it’s a possibility that you will invest in a company that ends up going bankrupt or a project that fails to materialize.
This is the primary way that saving can be differentiated from investing: saving is accumulating money for future use and entails little risk, whereas investment is the act of leveraging money for a potential future gain and that entails taking a risk.
While saving money may appear to have no risk… That’s not completely accurate. When you save your money, you’re risking your money to lose value due to inflation and lack of interest in your money. Generally, you’re expected to gain 10% percent or higher return on your investment, while you can’t even get 1% interest on your saving. Besides, no one has become wealthy with just saving. All the rich men and women in the world have invested their money, time, and energy to build lasting wealth.
Why Invest When You Can Save Money with Zero Risk?
As mentioned, investing is putting money to work to grow it. For example, when you invest in stocks or bonds, you are putting that capital to work under the supervision of a firm and its management team. Although there is some risk, that risk is rewarded with a positive expected return in the form of capital gains and/or dividend & interest flows.
Saving your money, on the other hand, will not grow, and may very well lose buying power over time due to inflation. Simply put, without investment, companies would not be able to raise the capital needed to grow the economy.
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DISCLAIMER: The content of our blog is for educational purposes only. I’m NOT a financial advisor, accountant, tax expert, or lawyer. If you need a financial advisor. Please consult a licensed professional in your city if you need financial and/or other professional services. Investing of any kind involves risk. While it’s possible to minimize risk, your investments are solely your responsibility. It’s imperative that you conduct your own research before investing. I’m merely sharing my opinion with no guarantee of gains or losses on investments.