Investing refers to the practice of making an investment in order to obtain a certain amount of money or return a certain amount of money in an appropriate period of time in return for a certain interest on that invested money. In simpler terms, investing means buying an asset with the intention of making a profit or a gain in the future from the purchase, and the realization of this profit or gain is typically an increase in the market value of that particular asset. There are a number of different ways in which one can invest, but essentially they all come down to one of three common methods – buying low and selling high, or holding out and waiting for the market to “revert” to a higher level, and the last is considered the most risky of the three. Of these, buying low and selling high is considered the least desirable and safest.
In terms of what is considered a good investment portfolio, there are various different categories of investments depending on how the term is interpreted. Some investors stick with long-term investment programs such as stocks and bonds, real estate investments, and some even go as far as to include alternative investments into their portfolios. Other common types of investments that many investors do include our mutual funds, which are set-up investment plans that pools investments from multiple investors together, bonds, commodities, money markets, and even certificates of deposit (CD) accounts.
In terms of what is considered a bad investment strategy, the bottom line is that no strategy is perfect. In general, when you choose to put money into an area, you should only do so after you have done your homework and made sure that it has the potential for providing a profit over time. When it comes to bonds, investing in the stock market is a bad choice due to the fact that the interest rates on bonds fluctuate so frequently, and if interest rates go up, you can kiss your bond goodbye. On the other hand, choosing to invest in real estate is a sound investment strategy because it offers such low risk, although the profit potential isn’t as high as it would be with stocks and bonds. However, as with stocks and bonds, real estate prices tend to fluctuate in price, and while they do increase over time, the best place to put money is in rental properties.