Investing refers to the act of creating and advancing money so that it can be used for making future purchases. A person who is investing in securities such as stocks, bonds, mutual funds, or any other financial instrument is called an investor. When an investor invests in securities, he is usually buying a promise to sell them at a certain date for a specific price. Investors usually rely on the returns they can get from their investments; thus, they make sure to maintain the value of their principal.
To more precisely define investing, one must understand how the process of investing actually works. To invest simply means to put money into an investment with the intention of seeing a profit or return in the near future. Simply put, to invest in stocks means buying an inventory or an item with the aim of generating income from the future sale or the appreciation of the item that is being bought. There are many different types of financial instruments that can be invested in and each type of investment yields a different rate of return. There are bonds, stocks, mutual funds, money market funds, treasury bills, and mortgage-backed securities just to name a few of the different types of investments.
There are many people who have the wrong concept about investing because they think that it is only money that is involved in this process. Money is just part of it; however, investing involves your time as well. If you are planning on investing, you have to identify the asset that you will invest in and research it thoroughly. You must also determine the terms of purchase and sale and know about the processes involved in investing so that you can fully understand the implications of your actions. It takes a lot of work to be successful at saving for retirement and investing can definitely help you in this regard.