Sunday, August 11, 2013

Things that are not investments, things that are investments

So, what is an investment, and what isn't? Let's start off with the basics - defining investment. Lucky for all of us, we can count of good ol' trust Investopedia!

"Investment: An asset or item that is purchased with the hope that it will generate income or appreciate in the future."

Basically, if it's not worth more in the future, it's not an investment. Buying a TV, a car, a watch, jewelry, all these things generally don't increase in value. I don't know about you, but I'd want to pay less for a 2nd hand car or TV, haha. Actually, pretty much anything that most people buy are not investments.

I think it's much easier to think about what actually is an investment, and by elimination, the rest are not investments!

Precious Items (Gold, Art, etc.)
Businesses / Stocks
Real Estate

Well, other than these main ones, there are tons of variants of these investment vehicles. There's preferred stock, convertible bonds, money markets, timed deposits, REITs, mutual funds, CFDs and etc... The list is really quite long. The main thing though, is that you can be pretty sure that the things that a normal person purchases on a day-to-day basis, are not investments. Rather, you can call them expenses, haha.

To make money, just make sure that your expenses are trimmed down to the necessary, and that you're putting money into complicated things that does sound like an investment!

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