Investing Facts
Investing is the concept of buying an asset. An asset is defined as something which generates value, which can be either a cash income or some kind of increase in the value of the asset itself. Investing is different from work where the worker gets paid for their effort or time. Investment is something which happens at all scales from individuals up to whole countries, as well as families and corporations between the two in size.
All assets have some degree of risk, as well as some likelihood of generating an increase in value. Assets include things like bonds, financial derivatives such as futures or options, land, commodities, stocks, or businesses. Each different asset has a different degree of risk as well as a different likelihood of generating an increase in value somehow. The decisions involved in investing are largely about comparing estimated risks and returns for different assets as accurately and realistically as possible.
Investment risk not only includes the risk that no increase in value will be generated by the asset, but additionally the risk that the asset itself will decrease in value to some extent (or even become totally worthless). Risk and return will also vary over time.
A business is fundamentally involved in investment. A business owns assets (as well as liabilities, things which cost money to own) which can be physical or not, and those assets are used to generate cash flow, other assets, or both.
Real estate is one common form of investment, and residential real estate is usually considered to be less risky than commercial real estate. There are lots of misunderstandings about real estate investment, including false concepts on what investment is compared to speculation.
Other assets used for investment can include such things as stocks, shares, commodities, metals (such as gold or silver), jewelry, bonds, art, and many other things. As with any type of investment, there will be risks associated with each of these asset categories, as well as potential gains in value from owning them for a particular period of time.