Investing is a complicated and oftentimes confusing topic. But it doesn’t have to be. The reality is that investing can be fun and highly profitable, but only if you know what you need to do ahead of time. The purpose of this article is not to make you an expert in finance overnight–I’ll save the courses for my university days–but rather, to provide some insightful information about investing so that you can feel more confident when making decisions about your future finances.
First, we’ll discuss the concept of “investment.” The dictionary definition of investment is: “an act or procedure by which property is acquired with the deliberate intention of using it as capital or investment and then sold later at an anticipated higher price.” This is a rather vague description, but it will allow us to define other terms very easily. What constitutes as a good “investment” and what doesn’t?
To start, we must define what capital is. Capital is any money held used to purchase goods and services that are expected to increase over time. By way of example, imagine an individual who purchases a computer for $750. The individual will probably be content with the purchase because it will last longer than a laptop computer, and the person can do some additional things with it. What if the individual
instead invested that $750 and put it into a savings account with a bank. The individual will probably receive an interest rate of anywhere from 1% – 5%. After two weeks, they can withdraw that money to use elsewhere, or they can let it sit and collect interest. In either case, the value of this money should increase over time. Of course, there are some schemes where people lose money rather than make it.
In summary, we can say that “capital” is a good investment if you expect to make more money with it than you paid for it .