Investing is to grow one’s money over time. An investment is defined simply as a financial asset or item acquired with the intention of generating income or recognition. It is the purchase of goods that are not consumed today but will be used to create wealth in the future or a financial asset purchased with the expectation that it will provide additional income or be sold at a higher cost price for a later profit.
The most basic way an investment works is when you buy an asset at a low price and sell that asset at a higher price. This type of return on investment is called capital gain. One way to make money is to earn returns by selling assets for a profit or realising capital gains when the value of an investment increases between the time you buy it and the time you sell it is called appreciation.
1. A share or stock can rise up when a company develops a hot new product that boosts sales, increases revenues, and raises the stock’s market value.
2. A corporate bond may appreciate if it pays 5% annual interest and the same company issues new bonds with only 4% interest, making yours more desirable.
3. A commodity such as Gold may appreciate as the US dollar loses value, increasing demand for Gold.
4. Because you renovated or repaired the property or because the neighbourhood became more desirable for young families with children, the value of your home or condominium may have increased.
Types Of Investment
If you are serious about investing in assets, it is better to hire a financial advisor to point you and help you determine which type of investments will help you meet your financial objectives.
Stocks, also known as shares or equities, are perhaps the most well-known and basic type of investment. When you buy stock, you are purchasing a stake in a publicly traded company.
Annuities can provide an additional source of income in retirement. However, while they are relatively less risky, they are not high in growth. As a result, investors view them as a supplement to their retirement savings rather than a primary source of funding.
You can make a real estate investment by purchasing a house, a building, or a plot of land. Real estate investments vary in risk and are affected by a wide range of factors, including crime rates, economic cycles, public school ratings, and the stability of local governments.
Commodities are potentially high-risk investments. Futures and options investment frequently involve trading with borrowed money/funds, which increases your risk of failure. As a result, buying commodities is usually for more experienced investors.
Bonds give investors the opportunity to “Become the Bank” When businesses and governments require capital, they borrow it from investors by issuing debt known as bonds. Not all bonds are “safe” investments, though. Some bonds are announced by companies with poor credit ratings, meaning they may be more likely to default on their repayment.
How to invest?
There are different providers from banks to individual professionals who can help you with investing. Fundvest mobile application is an easy-access tool, to grow your long-term wealth. We offer a wide range of stocks and ETFs and automated investing.
Investing ensures financial security both now and in the future. It enables you to increase your wealth while also outperforming inflation. You also reap the benefits of compounding. Furthermore, investments have the potential to help you achieve financial goals such as saving for retirement, purchasing a home, and creating an emergency fund, among others. It instils financial discipline because it requires you to set aside a certain amount each month or year for your investments.