Investment

To invest is to make a financial commitment with the hope of reaping a favourable benefit or return in the future. To put it another way, to invest is to possess an asset or an item with the intention of earning income from the investment or reaping the benefits of your investment, which is a growth in the value of the asset over a period of time, via the appreciation of the asset. When a person makes an investment, he or she must always give up some current item that they possess, such as time, money, or effort, in order to do so.

When you invest in finance, the advantage of doing so is when you get a return on your initial investment. In addition to a gain or loss realised through the sale of a property or investment, the return may include unrealized capital appreciation (or depreciation), investment income such as dividends, interest, rental income and other types of income, or a mix of capital gain and income. The return may also include currency gains or losses as a result of fluctuations in the exchange rate of the foreign currency.

Riskier investments, in general, elicit greater expectations from investors in terms of returns. When making a low-risk investment, the expected return is often modest as well. In the same way, high risk is accompanied with great rewards.

Investors, especially those who are new to the market, are often encouraged to follow a certain investing plan and diversify their portfolio. Diversification has the statistical impact of lowering total risk by a significant margin.