What is investing?
Investing is the process of putting money into “assets”, such as stocks and shares, bonds, property, commodities or any other asset, that will, over time, increase in value and, or, produce an income.
It is putting your money to work as hard as possible, for as long as possible, so that you don’t have to in later life. The sacrifice of investing can be considered on the basis of the “some jam today, or more jam tomorrow” scenario.
By investing money you have today, instead of spending it, you are building wealth and freedom for your future.
Investing differs from saving in a number of ways. When you save, you are putting money aside in a savings product, with a bank or building society, that won’t lose your capital, but also won’t have the ability to grow very much.
Saving can be for short periods of time and is often used for emergency funds, or for something specific, like a holiday, a car or a deposit on a house.
Investing on the other hand, is about trying to make your money grow significantly over time, using both capital appreciation, and the wonders of compound interest.
It is not a short term project, and should not be considered for periods of time of less than five years. Ideally, your investment time frame should be measured in decades, and be started as soon as possible.
Investing also involves risk, meaning your capital is at risk of reducing or even being lost altogether.