Investment
An investment can best be described as an asset that is usually purchased in hopes of getting a future return or interest from it. The term ‘investment’ is used differently in economics and in finance. In economics the term ‘investment’ refers to a real investment, such as a house or a machine. Financial economists refer to an investment as a financial asset such as money that is place in a bank account or in the stock market.
In economics investments include things that can be used for future benefit, such as a building, a business, or it can be something that is intangible such as schooling or training. An investment is something that is gained over a period of time and does not include the capital. Economist measure investment through interest rates; a higher interest rate may discourage investment as it costs more to borrow money.
In finance, investment refers to buying securities or financial assets, such as shares, equity investment, foreign exchange, mutual funds, stocks and bonds, oil and gas, exchange traded funds, or online trading. These assets are expected to provide a future cash flow, which can increase or decrease in value.
When people hear the word ‘investment’ they typically think of big businesses and vast sums of money. Although it is true that many of the top level investments may run into the millions, it is possible for an average person to invest small amounts of money. Investment covers a range of options, with the stock market being one of the most traditional types of investing. Many people may view this as being a difficult type of investment, however with the new range of online stockbrokers it has become easier and fairly inexpensive to get involved in buying and selling shares. Another popular form of investment is that of property. Property investment, or real estate investment, has become a growing alternative type of investment for many. By putting money into a residential property and then taking a rental income is seen as a win-win situation.
However, as with any type of investment you will want to check out what risks are involved in the type of investment you are looking into. You should know what type of risk is involved in the investment and investigate the area thoroughly before investing. You should also make yourself aware of the fact that most investments take time to accumulate, and will not give you an instant income. There are long-term investments and there are short-term investments. All types of investments should fit into your personal financial planning as well as your retirement planning.
