Investment is any asset purchased with the expectation that it will rise in value or pay you money over time. Investments can range from practical items like property and real estate to financial instruments such as stocks, bonds and mutual funds. Some investments are less risky than others, but all come with the possibility that you will lose some or all of your original investment. This is known as investing with “risk.”
The most common forms of investments are stocks and bonds. A stock is an ownership share in a company, while bonds are essentially an IOU from a company or government that pays you a fixed amount of interest over a specific period of time. Other types of investments include commodities (like gold and oil) and derivatives. Each has its own unique risk and return profile.
Before you begin to invest, set clear goals and determine your financial situation and risk tolerance. You can choose to do-it-yourself or work with an advisor, but it’s important to understand the costs involved in each option. You may also want to consider strategies such as dollar-cost averaging to help manage volatility and cost.
Investing can be a great way to save for things you’ve always wanted to do, such as start your own business or travel the world. It can also be an effective way to ensure that your income is sufficient in retirement when you stop receiving income from your job.