What is ‘Investing’
Investing is the act of committing money or capital to an endeavor (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit. Investing also can include the amount of time you put into the study of a prospective company, especially since time is money.
BREAKING DOWN ‘Investing’
The income that results from investing can come in many forms, including profit, interest earnings, or appreciation. Investing refers to long-term commitment, as opposed to trading or speculating, which are short-term and often deal with heavy turnover and, consequently, a higher amount of risk.
Investing is the key to building wealth, but investing in and of itself is not enough. You have to invest wisely! Investing is risky, as the business you invest in could go down in value or even close down completely. It is important to research the business and analyze the risk of investing before putting money down. To learn more about how investments generate capital and why an investment might benefit you, read How Will Your Investment Make Money?
The term investing can also refer to time. For example, you could invest your time in working on a project or mentoring a promising young talent. In both of these situations, the same desired outcome applies as investing money: you’re hoping to reap some sort of benefit. This benefit could come in the form of professional success (which can also lead to monetary profit) or the satisfaction of bettering another human being.
How to Invest
You can make an investment at a bank, broker, or insurance company. In many cases, these organizations pool the investment money they receive to make more large-scale investments, and each individual investor has a claim on a portion of the larger investment. You can also make an investment with a broker, who will handle the order in exchange for a fee or commission.
If you want to try your hand at investing but don’t know where to start, read Investing 101: A Tutorial For Beginner Investors.
Types of Investment
There are two major kinds of investment: fixed income and variable income. Fixed income investment refers to an investment that bring in a set amount of interest income on a regular basis, such as bonds or fixed deposits. Variable income investment refers to business or property ownership.
History of Investing
The New York Stock Exchange (NYSE) first opened in 1792, and it remains today one of the world’s leading exchanges. Most of the established banks that dominate the investing world began in the 1800s, including Goldman Sachs and J.P. Morgan. In the early 1900s, the term investing was highly intertwined with trading, speculating, and other terms that are now seen to be more risky and refer to short-term endeavors. Around the 1950s, investing was distanced from these other terms and became known as a longer-term, more reliable way to purchase securities.
The most well-known and successful investor today is Warren Buffett, CEO of Berkshire Hathaway and renowned philanthropist. His name is usually near the top of the world’s wealthiest people list.