Investing is allocating money in the expectation of some benefit/return in the future. To invest means owning an asset or an item to generate income from the investment or the appreciation of your investment which is an increase in the value of the asset over a period of time.
In layman terms, investing is simply letting your money work for you. It’s a different way to make money instead of working.
Investing to earn money
Growing up, our elders advised studying hard, getting good grades, and getting a good job to earn an income. Don’t get the wrong idea. Education and seeking knowledge have unquantifiable benefits. However, the point we are making here is that earning an income through working alone is not the only way of making money.
There is a fallacy in only thinking of earning income through working. There is a limit to how many hours a day we can work. This is where investing comes in handy.
There are many different ways to invest. It can include putting money into stocks, bonds, mutual funds, cryptocurrency or real estate (among many other things). Sometimes people refer to these options as “investment vehicles”. This is just another way of saying “a way to invest.” Each of these vehicles has positives and negatives, which we will discuss later in this series.
Investing is certainly not gambling. Gambling is the wagering of money or something of value on an event with an uncertain outcome, with the primary intent of winning money or material goods.
A “real” investing does not simply throw money at any random investment; he or she performs thorough analysis and commits capital only when there is a reasonable expectation of profit. Yes, there still is a risk, and there are no guarantees, but investing is more than simply hoping Lady Luck is on your side.
Follow this series to learn more about generating that money.