A dictionary definition of investment might read, “the action or process of investing money for profit,” but let’s take a look at what those investments might be. Basic investments fall into three broad categories:
1. Ownership Investments – these include stocks, business, real estate, and precious objects such as metals or collectibles. This type of investment is the most profitable, but also the most volatile.
2. Lending Investments – these include your savings account and bonds. On the whole, these types of investment are lower risk than ownership investments and therefore offer lower returns.
3. Cash Equivalents – this type of investment is easily converted back into cash and includes money market funds. The returns are very small but they are also very low risk.
A further investment category to consider is education. Investing in your education can increase your potential to earn a higher income, and with knowledge said to equal power, education can open the doors to realizing your full potential in whatever it is you choose to do.
Choosing the right investment opportunity for you depends largely on your financial goals and whether they are short, medium or long term. You may need your investment to provide a steady income, you may need money for something you plan to do within the next five to ten years, or you may be planning ahead for your retirement in thirty years from now, but ultimately, the amount of risk you're prepared to take with your money will be the deciding factor.