Written By:
Paul Tracy
Updated September 30, 2020

What Is Investment?

An investment is an asset intended to produce income or capital gains.

How Does Investment Work?

Investments can be stocks, bonds, mutual funds, interest-bearing accounts, land, derivatives, real estate, artwork, old comic books, jewelry -- anything an investor believes will produce income (usually in the form of interest or rents) or become worth more.

Why Does Investment Matter?

The safety of the principal is of concern in any investment, although some investors are more risk tolerant than others and are thus more willing to lose some of their principal in return for the chance of generating a higher profit. The investor's ability to tolerate risk and the incremental return associated with increasing amounts of risk are two primary factors that distinguish types of investments from one another and help determine appropriate investments for a given investor.