Investing is using money to buy assets like–stocks, real estate, loans, royalties, currencies, art, crypto, and more–in the hopes that they will increase in value over time.
Investing works through time (compound interest) and value. Over time assets are seen as more or less valuable, causing their price to increase or decrease should a sale take place.
Now let’s go through an example of how compound interest investing in stocks works. Say you want to start investing and have an extra $1000 on hand. But you don’t want to invest anything else.
Investors invest in assets based on their risk tolerance. Investing in riskier assets can grow investments faster, but increased portfolio volatility is likely. Conversely, safer investments have less risk, but the growth is slower.
The dollar you earn today is worth less than you make tomorrow. It’s called inflation. Every dollar loses its purchasing price as the costs of living increase.