Investment is the outlay of resources today (like time, money and effort) for a greater payoff in the future. It allows you to save for goals like paying for your child’s education, starting a business or saving for retirement. It also helps you beat inflation.
Investment has a long history in economics and is one of the central concepts in modern empirical analysis. Its surges and collapses are a primary cause of recessions. It is a subject that has been intensely studied by many of the great economists, including irving fisher, arthur cecil pigou and alfred marshall.
Different types of investments provide returns in the form of capital gains, interest income or a combination of both. They can take the form of physical assets, such as shares in companies, fixed deposits or real estate, or financial instruments such as debt securities and bonds. Investments may be diversified to reduce the risk of any particular type of investment. This is achieved by investing in a range of assets and by using strategies such as dollar cost averaging to spread purchases over time.
Investing in a variety of assets can also help you to avoid the effects of inflation by reducing your exposure to volatile markets. It is a good idea to rebalance your investment portfolio at least once per year. This will ensure that it remains aligned with your asset allocation target. Investors can rebalance their portfolios themselves or hire a professional, such as a financial advisor or robo-advisor.