What is Investing?

First of all, let's define what investing means.

It can include buying financial instruments, which we will discover shortly.

Why to Invest?

Investing is essential for both individuals and organizations.

Here are several reasons:

• Wealth Accumulation - investing allows individuals and organizations grow their wealth (essentially, earn extra money) over time;
• Passive Income - investments can provide a steady stream of income without the need for active work;
• Economic Impact - investments contribute to economic growth by supplying capital for businesses to expand, create jobs, enhance infrastructure etc.

Common Types of Investments

Considering assets for investing, the most common are:

• Stocks - shares of ownership in a company that can offer high returns but also come with high risk;
• Bonds - debt securities issued by corporations or governments that provide regular interest payments and are generally considered safer than stocks;
• Real Estate - investing in property to generate rental income;
• Commodities - physical goods like natural resources or agricultural products that can be traded;
• Cryptocurrencies - digital or virtual currencies that use cryptography for security.

However, it’s important to note that investing always carries risk.

For example, if you invest in a company’s stock and the company faces a crisis, the value of the stock share may drop, resulting in a loss of money.

So, investing in a single asset is especially risky. However, we can spread our investments across several assets (this process is called diversification ) and significantly reduce risk.

We will explore it in a more detailed way in the following chapters.