What is an Investment?

Understanding investments is a basic part of learning how to control your money. An investment can take many forms, but in general, an investment is any type of item that is purchased with the intent of the item returning a profit to the buyer, either through generating income on its own and/or selling the investment.



There are millions of investments available on the market today, resulting in many people having trouble selecting the investment that is right for them. Anyone who is considering where to place their money so that they can earn a return on it should research all of their options very carefully. There are a lot of choices, but only a few of them will be right for any particular investor.

A safe investment such as a savings account or government bond is typically recommended for people who have money that they cannot afford to lose. In fact, a safe investment is a good place to put an emergency fund and/or cash that needs to be readily available for immediate bills.

An example of a higher-risk investment is a mutual fund. These funds are conglomerations of many different types of stocks, allowing a person to make an investment in the stock market without having to choose just one or two companies. Despite this, however, a mutual fund is subject to large swings in value. In fact, it is not uncommon for its value to rise or fall by over ten percent on a weekly basis.

Finally, there are investments that are considered to be very high risk. These include buying and flipping real estate, purchasing art, and other so-called exotic investments. While there are thousands of these types of investments, they are considered to be very risky because of the high potential for an investor to lose all of his or her money.