Lesson One: Investing Defined and Explained

Investment is one of the fundamental concepts in finance. No financial discussion, website, or blog is complete without defining and explaining investing. I intend to write about investing in detail with reference to households and people, as a tutorial, starting by defining and explaining investing as a phenomenon and then slowly incorporating complex topics in later posts.

Investment Definition

“Investing is the concept of putting ‘surplus’ money into things like stocks, bonds, real estate, starting a new business, buying a capital asset, etc. with the hope/forecast of capital gains or ongoing streams of income positive net results from this use of money.

With reference to individuals, it is generally recommended to use surplus money for investments as there is a fine line between investing and speculating, so investment decisions should be made very carefully and with proper research and analysis. Investing always carries the risk of losing the amount invested, and this loss would not be under the control of the investor, so it is always advisable to measure and investigate all the risks involved.

Investment is a parallel concept to savings, where savings are made with the intention of coping with rising inflation. Investment, on the other hand, is done with the intention of earning income streams or having capital gains on money invested, and it also creates employment and increases. the level of production in a country. People save or invest their excess money depending on the risk they are willing to take. People who take more risks prefer to invest than save.