What is investment? Understand everything about the concept of financial investment

Understanding what investment is is fundamental to achieving your goals. Many people have doubts about this subject, but here you will see an explanation that will change the way you understand this concept. Investment is any expenditure or application of resources that produces a future return. This concept involves both money and intellectual, social or natural capital. And believe me: unraveling their meanings can be much simpler than it seems. You don't need to be a financial expert to invest, but it's important to have a sense of what investment is because this concept is part of most people's lives. After all, our relationship with money affects us directly. Unfortunately, in many cases this relationship is conflicting — especially for those who don't know how to handle money. In order not to go through this, read this post and understand, in a simple way, what investment is and how it can help you achieve your goals. What is investment? In a broad way, the concept of investment is an outlay in which there is the expectation of a certain gain or future result. From this reasoning, several items can be considered as capital to invest: time, energy, studies, attention and so on. Thus, both investing time in studies to acquire knowledge and planting a crop are attitudes that can be understood as an investment. When talking about finance, what is financial investment? Basically it is applying money so that it produces income in the future. This is possible due to the effect of compound interest on financial investments, which causes money to multiply. The mechanism is similar to that of a debt, which grows over time. Values are multiplied by themselves over a given period. The final value essentially depends on the time the resources remained under the effect of compound interest. In very simple terms, being in debt is owing money to the bank and investing is lending money to the bank. Investing is different from saving It is common for the expressions “invest” and “save” to be used as synonyms, although their meanings are different. Saving is related to saving money and usually requires discipline and changes in financial habits, such as cutting superfluous expenses, for example. With this, the objective is that, at the end of the month, the inflows of money are greater than the outflows. For many, this can be an almost impossible mission, as there are many obligations to be honored and money is more likely to be lacking rather than surplus. To save, it is essential to focus on achieving the established goals, in addition to just paying all the bills. Anyone who decides to save to buy a car, for example, must set aside a certain amount for the time necessary to reach the final goal. Investing, in turn, is not just raising money, but applying it so that there is a return in the future. In Brazil, confusion is also frequent because the application most used by people to save money is the savings account, despite the poor performance. Investing is different from speculating Benjamin Graham, a great investor, summed up the difference between investing and speculating: “An investment operation is one that, through analysis, promises security for the principal and an adequate return. Operations that do not meet these requirements are speculative.” Speculating, then, is investing under conditions of uncertainty: the speculator buys a good, with the confidence that it will appreciate in value, to later sell it at a higher price. The risk of this type of operation is very high, since at the time of purchase, the speculator is never sure that it will even increase in value. Therefore, speculating is generally an act associated with gains or losses of huge amounts of money. Investment has security as a characteristic. The investor studies the possibilities, considers the risks and, only later, when he already has more knowledge about the conditions of the business, makes the decision to invest. In this case, the chance of return in relation to the amount invested is much greater. Investing is different from betting Another common mistake is believing that investing is a gamble. Who has never heard a phrase like “if you want to invest, bet on the real estate market” or something like that? However, investing is not gambling! Betting is risking money on something totally uncertain and random, with no guarantee of return. In betting, you depend exclusively on luck to get a return - it's literally like playing the lottery. Investment, on the other hand, presupposes study and analysis of an asset and its risks. This does not mean that the return is certain, but the previous study brings a greater possibility of profit. However, it is important to emphasize that there is no investment without risk! There are investments with different risks, to a greater or lesser extent. even save

money saved at home is risky, as it can become devalued with inflation. That is, there is no way to escape risk when talking about investment. Therefore, when investing, it is necessary to know what your risk tolerance is. Some questions can be asked to identify this characteristic: What level of risk is most suitable for your profile? What would be your reaction to possible losses in the short term, with the possibility of gains in the long term? The answers to these questions are essential to outline your profile and the investment strategy that best suits you. Why invest? At first, the answer to that question seems simple: make more money. What matters, however, is: make more money for what? This can vary from person to person. Some want to own a home, some want a peaceful life after retirement, and so on—most of these goals relate to financial security. It may sound cliché, but life is full of unforeseen events. Sometimes situations happen where the lack of money is a limiter to solve an unexpected problem. You yourself must have seen a similar case. Therefore, as much as you consider that you have no objectives or goals to be achieved, the simple reason to have a financial reserve for emergency situations can be a good reason to invest. So, setting goals is essential for financial planning and should always be the first step for anyone who wants to be a successful investor. What are the main investor profiles? The first step to investing is to know your own investor profile. This is important because not all types of financial investments are suitable for everyone: some will tolerate greater risk, others will not. Determining the investor profile considers aspects such as life stage, objectives, tolerance for possible losses and the amount of money available to invest. To help you discover yours, we present below the characteristics of the most common profiles. Conservative The conservative profile includes investors who do not tolerate risk, do not want to lose equity and do not deal well with sudden fluctuations in asset prices. This profile has short- and medium-term goals and generally invests to form an emergency reserve or achieve smaller goals. Moderate In a way, the moderate investor can be defined as one who accepts taking controlled risks. It usually includes those looking to build long-term wealth. It combines conservative ways of investing (such as fixed income investments) with bold choices, such as investment funds. Aggressive Investors with an aggressive profile are known to give preference to higher gains, even though this entails a large exposure to risks. This type of investor admits to suffering some losses, as long as they are compensated in the future. For this reason, the investment portfolio of this group is mainly composed of shares on the stock exchange, shares of multimarket funds and operations in foreign currency. {Ebook} Getting Rich Investing? Guide with Myths and Truths from Magnetis Investimentos How to start investing? Once you better understand what investments are and what your profile is, how about starting to invest? A good way to enter this universe is to survey all aspects of your current financial situation: your sources of income, your debts and your fixed expenses. Thus, it is possible to know how much you can apply. And the good news is that it doesn't always take a lot of money to get started. Currently, there are several applications available on the market and they serve the most different investor profiles. Check out some options below. Treasury Direct Ever thought about lending money to the government? This is the logic behind public securities traded on the Direct Treasury. They are issued by the State to raise funds and finance government activities. Whoever buys them is promised to receive the money back within a specified period, plus interest and other corrections (such as inflation, for example), which change according to the chosen paper. Treasury's great advantage is its security. As it is financed with resources from the National Treasury, the chances that the bonds will not be paid are very small, even in the most adverse economic situations. On the other hand, this type of investment performs better in medium and long term investments. investment funds Investment funds are a kind of union of resources from several investors. Those who invest in them have their money converted into shares. The deposited resources are then applied according to a strategy and may vary between conservative options (such as fixed income), daring options (such as shares) or a mixture of them.  

It is difficult to determine in advance the profitability of an investmentinvestment, but they can offer good yields. However, they usually present greater risks, in addition to higher costs, since it is necessary to pay various fees and taxes.

Actions Stocks are the smallest parts of a publicly traded company. Whoever invests in them starts to share the company's risks and can obtain income from the gains achieved by the eventual good performance that it presents. There is no single way to invest in stocks. Even so, to trade these papers, you need to be aware of the risks they present, have knowledge of the market and have a reasonable amount of money available. Despite this, they can present excellent yields. For those who have no idea how to identify their profile and choose an appropriate investment, a good tip is to seek investment advice. She will help you make a personalized investment plan. Did you know that Magnetis guides you on your journey towards the best investments? Do a free simulation and find out which applications are most recommended for you! Take the first step towards realizing your financial goals today! Now that you understand more about what investment is, how about getting to know the financial investment options at your disposal? Download our Complete Guide on Types of Investment for free and find out about the alternatives.

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