WHAT IS INVESTMENT?

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What is Investment Definition? 

An investment is essentially an asset that is created with the intention of allowing money to grow. Investment may generate income for you in two ways. One, if you invest in a saleable asset, you may earn income by way of profit. Second, if Investment is made in a return generating plan, then you will earn an income via accumulation of gains. 

Types of Investments 

Following are different types of investments 

1. Stocks

This includes shares of ownership of any company and helps you earn dividends in return. When you purchase a stock, you’re buying a share — a small piece — of that company’s earnings and assets. Companies sell shares of stock in their businesses to raise cash; investors can then buy and sell those shares among themselves. Stocks sometimes earn high returns but also come with more risk than other investments.

2. Bonds 

Wondering what is investment meaning in terms of bonds? It means lending your money to an institution or government, for which you receive fixed interest at regular intervals and also the face value upon maturity. Bonds are generally considered less risky than stocks, but they also may offer lower returns. The primary risk, as with any loan, is that the issuer could default.

3. Mutual Funds

In this, funds are collected from different investors and put in a company’s bonds or shares, which are managed by fund managers. On understanding what is investment meaning and your investment objectives, you may choose equity funds or debt funds, depending on your risk capacity. Mutual funds allow investors to purchase a large number of investments in a single transaction. These funds pool money from many investors, then employ a professional manager to invest that money in stocks, bonds or other assets.

4. Index funds

An index fund is a type of mutual fund that passively tracks an index, rather than paying a manager to pick and choose investments. The benefit of index funds is that they tend to cost less because they don’t have that active manager on the payroll. The risk associated with an index fund will depend on the investments within the fund.

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Written by:  Boaz Bett

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