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What Is An Investment?

what is an investment?
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An investment is something that one buys, in the hope that that item will bring a financial return. That financial return would usually be in the form of an increase in value of the item over time. However, it could also be in the form of revenue generated via the ownership of the item. For example: via rentals of real estate/property or dividends from the shares of a company.

Risk

By its nature, investment involves risk, and risk is what differentiates investment from saving. With saving, you are essentially keeping liquid assets in a risk free place, such as a savings account in a bank. However, in this situation, your assets would not grow. Indeed, due to inflation, your capital would actually decline over time. The acceptance of risk is essentially the price you pay for the chance to benefit from growth in the worth of your investments.

Investment Types

An investment can be a huge variety of different things. Some key investment types are:

Financial products, for example stocks/shares in a company, bonds, or in more recent years, cryptocurrency.

Pensions are a form of investment in that you set aside money for retirement.

Property, i.e. buy to let apartments or houses.

Tangible Items i.e. gold, silver, wine, art etc.