What Is an Investment?

An investment is an asset or item acquired with the goal of generating income or appreciation. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth...... In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.

An investment always concerns the outlay of some asset today (time, money, effort, etc.) in hopes of a greater payoff in the future than what was originally put in.


Understanding Investment

Investing is putting money to work to start or expand a project - or to purchase an asset or interest - where those funds are then put to work, with the goal to income and increased value over time. The term "investment" can refer to any mechanism used for generating future income. In the financial sense, this includes the purchase of bonds, stocks or real estate property among several others. 

 

Additionally, a constructed building or other facility used to produce goods can be seen as an investment. The production of goods required to produce other goods may also be seen as investing.

Taking an action in the hopes of raising future revenue can also be considered an investment. For example, when choosing to pursue additional education, the goal is often to increase knowledge and improve skills in the hopes of ultimately producing more income. 

 

Because investing is oriented toward future growth or income, there is risk associated with the investment in the case that it does not pan out or falls short. For instance, investing in a company that ends up going bankrupt or a project that fails. This is what separates investing from saving - saving is accumulating money for future use that is not at risk, while investment is putting money to work for future gain and entails some risk.