What Is an Investment?
An investment is an asset or thing acquired with the aim of generating income or value. Appreciation refers to an increase in the worth of an asset over time. When an individual buys a good as an investment, his intention is not to consume the good, but to use it to generate wealth in the future.
Investing always involves spending some resource today – time, effort, money or property – in the hope that a greater return will be obtained in the future than was originally invested. For example, an investor can buy an asset for cash now that the asset will provide income in the future or that it will later sell at a higher price at a profit.
How an investment works
The investment process aims to generate income and increase value over time. Investment refers to any mechanism used to generate future income. This includes buying bonds, stocks or real estate assets, among other examples. Also, buying an asset that is used to produce goods is considered an investment.
In general, any action taken with the hope of increasing future returns can be considered an investment. For example, when choosing continuing education, the goal is often to increase knowledge and improve skills. The investment of time in classes and the money paid for tuition can increase returns over a student’s lifetime.
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