Tuesday, December 01, 2009

What is an Investment

Most people will answer this by saying "Saving money," or "Stocks, Bonds, and mutual funds." And, these are most certainly investments.

However, they represent only a small subset of the investing universe. No, I'm not going to talk about Hedge Funds, Futures, Options, Real Estate, etc. Those are also part of the same sub category of investment - they are financial investments.

What then is the essence of an investment? It is putting to action today something of value with the reasonable expectation that by doing so you will receive more value in the future.

It doesn't have to be money that you put to action, and it doesn't have to be money that you receive.

You can invest time in order to get more time back. Assume you spend two hours each week watering your lawn and garden. You think about this and realize that by setting up the sprinklers you already have in your garage you can cut that time in half. Say it takes you 3 hours to find and set up the sprinklers. You've invested 3 hours today, to save 1 hour per week in the future.

You can invest time and money to get more money back.

You can invest money to get time.

You can invest money to get security (i.e. insurance).

What is important is that you are getting more value out than you are putting in. If you are, you are making an investment.

Look around, what simple investments could you make? You might be surprised how many hours you can get back for each hour you invest in streamlining your life.

No comments: