DEFINITION of 'Investing'

The act of committing money or capital to an endeavor (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit. Investing also can include the amount of time you put into the study of a prospective company, especially since time is money.


Loading the player...


The income that results from investing can come in many forms, including profit, interest earnings, or appreciation. Investing refers to long-term commitment, as opposed to trading or speculating, which are short-term and often deal with heavy turnover and, consequently, a higher amount of risk.

Investing is the key to building wealth, but investing in and of itself is not enough. You have to invest wisely! Investing is risky, as the business you invest in could go down in value or even close down completely. It is important to research the business and analyze the risk of investing before putting money down. To learn more about how investments generate capital and why an investment might benefit you, read How Will Your Investment Make Money?

The term investing can also refer to time. For example, you could invest your time in working on a project or mentoring a promising young talent. In both of these situations, the same desired outcome applies as investing money: you're hoping to reap some sort of benefit. This benefit could come in the form of professional success (which can also lead to monetary profit) or the satisfaction of bettering another human being.

How to Invest

You can make an investment at a bank, broker, or insurance company. In many cases, these organizations pool the investment money they receive to make more large-scale investments, and each individual investor has a claim on a portion of the larger investment. You can also make an investment with a broker, who will handle the order in exchange for a fee or commission.

If you want to try your hand at investing but don't know where to start, read Investing 101: A Tutorial For Beginner Investors.

Types of Investment

There are two major kinds of investment: fixed income and variable income. Fixed income investment refers to an investment that bring in a set amount of interest income on a regular basis, such as bonds or fixed deposits. Variable income investment refers to business or property ownership.

History of Investing

The New York Stock Exchange (NYSE) first opened in 1792, and it remains today one of the world's leading exchanges. Most of the established banks that dominate the investing world began in the 1800s, including Goldman Sachs and J.P. Morgan. In the early 1900s, the term investing was highly intertwined with trading, speculating, and other terms that are now seen to be more risky and refer to short-term endeavors. Around the 1950s, investing was distanced from these other terms and became known as a longer-term, more reliable way to purchase securities.

The most well-known and successful investor today is Warren Buffett, CEO of Berkshire Hathaway and renowned philanthropist. His name is usually near the top of the world's wealthiest people list.

  1. Investment Club

    A group of people who pool their money to make investments. Usually, ...
  2. Investment

    An asset or item that is purchased with the hope that it will ...
  3. National Association of Investors ...

    A non-profit organization that is dedicated to providing investing ...
  4. Markdown

    The difference between the highest current bid price among dealers ...
  5. Catalyst

    A catalyst in equity markets is a revelation or event that propels ...
  6. Bid Wanted

    An announcement by an investor who holds a security that he or ...
Related Articles
  1. Stock Analysis

    How Has Starbucks' Investment in Its Employees Paid Off?

    Discover how Starbucks' generous employee benefits have helped attract and retain the best talent, leading to benefits for the company's bottom line.
  2. Investing Basics

    The Seasons Of An Investor's Life

    From a tentative spring to a comfortable winter, learn how to weather the phases of your investing journey.
  3. Investing Basics

    Investing With A Purpose

    Your reasons for investing are bound to change as you go through the ups and downs of life. Setting goals is the first step in determining which investment vehicles are right for you.
  4. Active Trading Fundamentals

    3 Things Investors Can Learn From Traders

    By incorporating some of the best practices of top traders, investors can greatly improve portfolio returns.
  5. Trading Strategies

    10 Tips For The Successful Long-Term Investor

    These guiding principles will help you avoid common folly during the decision-making process.
  6. Entrepreneurship

    Five Investing Pitfalls To Avoid, According to Investor's Business Daily

    Common sense or common folly? Discover some approaches to circumventing typical stumbling blocks on the road to profitable investing.
  7. Active Trading

    FYI On ROI: A Guide To Calculating Return On Investment

    Return on investment is a simple equation that can give you an edge when fine-tuning your portfolio - here's how to use it.
  8. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  9. Active Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  10. Mutual Funds & ETFs

    Best 3 Vanguard Funds that Track the Top 500 Companies

    Discover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
  1. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Full Answer >>
  2. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>
  3. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  6. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center