Investing is how you make your money grow, or appreciate for long term financial goals. It is a way of saving your money for something you would like to achieve in the future, your children's education, your retirement, your house...In simple words, investing means putting your money to work for you.
There are many different ways how to make an investment. This includes putting money into stocks, bonds, mutual funds, real estate, or starting a business. These options are referred as "investment vehicles," which is just another way of saying "a way to invest."
Investments have a risk-reward spectrum. As a general rule of thumb, the more risk an investor takes on an investment the more potential returns he/she stands to make, and vice versa. Your focus in investing is on return and can run the spectrum from conservative to very aggressive in terms of risk. One way you measure results is by the expected return weighed against the anticipated risks.
Along risk-reward spectrum, investments can be classified into three basic categories: cash, bonds and stocks. Each category has its own set of characteristics and plays an important part in structuring a sound investment portfolio.
Time in the market
Investing in the stock market does not depend on timing the market, but time in the market. Stock prices fluctuate from day to day, sometimes wildly. That's the nature of the stock market. While past performance does not guarantee future results, history has shown that, over the long term, stock market investing can be rewarding.
Long-term investing doesn't have to mean 50 years, either. History has shown that just five years can make a big difference. Long-term investing in the stock market has paid off historically.
History has also shown that trying to time the market is next to impossible. Timing the market is basically the strategy of buying and selling of financial instruments (most often stocks) by attempting to predict future market price movements. It's better to stay fully invested during all market cycles. This has, historically, given investors the greatest average return by comparison. It's time in the market that's important, not timing the market.