A financial investment involves buying something that generates income or grows in value over time. Common investments include stocks, bonds, exchange-traded funds (ETFs), and real estate. As with all investments, there’s a risk that you could lose money.
Investing your hard-earned money can help you achieve your financial goals, such as purchasing a home or retiring at a certain age. However, investing can be complicated, and it’s important to understand the key terms before you start.
One of the primary advantages of investing is that it allows you to grow your money over a longer period of time than saving money in a savings account, which usually doesn’t offer much growth. This is because of the magic of compounding, where your return on an investment grows at a higher rate than the initial amount you put into it.
Another reason to invest is that it can protect you from inflation, where a unit of currency will be worth less tomorrow than it is today. This is why many people invest in precious metals like gold, or in property that can appreciate in value, such as a house or an apartment.
The most important things to consider when making an investment are your risk tolerance and your time horizon. It’s essential to know your ability and willingness to tolerate market fluctuations and potential losses before you start investing, and also to set clear financial goals for yourself, such as your ideal retirement date or a child’s college education. It’s also a good idea to review your investments periodically, as the choices you made two years ago may not be right for you now.