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What is 'Investing'

Investing is 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.

BREAKING DOWN 'Investing'

The income that results from investing can come in many forms, including financial profit, interest earnings, or the appreciation of the asset. 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.

Intelligent investing is key to building wealth. Investing always contains risk 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 supporting another person.

How to Invest

You can make an investment at a bank, with a broker or an insurance company; one can invest directly – via an angel or seed investment in a startup venture – and in several other forms. In many cases, institutions pool investment money from several individuals to make more large-scale investments, such as a majority stake in a company in order to gain more voting rights. Each individual investor can continue to hold a claim on the portion of the larger investment in some cases. Brokers handle orders for many public company stocks 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

While a fixed income investment refers to an opportunity that brings in a set amount of interest income on a regular basis, such a bond or preferred share of a company, investments also take the form of common equity stakes. Both preferred and common company shares are forms of corporate ownership in publicly traded companies. In private equity, forms of investment also include equity stakes; however, these stakes are not traded on a public exchange.

History of Investing

The New York Stock Exchange(NYSE) first opened in 1792, and it remains today one of the world's leading public market exchanges, along with NASDAQ, AMEX, and others. Most of the established banks that dominate the investing world began in the 1800s, including Goldman Sachs and J.P. Morgan. In the 1900s, the term investing was more intertwined with trading and speculating. Simultaneously another school of value investors developed, who focused on longer-term, more reliable way to obtain and grow wealth.

The most well-known and successful value investor today is Warren Buffett, CEO of Berkshire Hathaway. Warren Buffet is also a renowned philanthropist and one of world's richest people by financial assets.

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