Friday, October 24, 2008

What is investment?

According to Wikipedia, investment is a term with several closely-related meanings in business management, finance and economics, related to saving or deferring consumption. Wiki went on to say that investment is the choice by the individual to risk his savings with the hope of gain.

According to dictionary.com, investment is

1. the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.
2. a particular instance or mode of investing.
3. a thing invested in, as a business, a quantity of shares of stock, etc.
4. something that is invested; sum invested.
5. the act or fact of investing or state of being invested, as with a garment.
6. a devoting, using, or giving of time, talent, emotional energy, etc., as for a purpose or to achieve something: His investment in the project included more time than he cared to remember.
7. Biology. any covering, coating, outer layer, or integument, as of an animal or vegetable.
8. the act of investing with a quality, attribute, etc.
9. investiture with an office, dignity, or right.
10. a siege or blockade; the surrounding of a place with military forces or works, as in besieging.
11. Also called investment compound. Metallurgy. a refractory material applied in a plastic state to a pattern to make a mold.
12. Archaic. a garment or vestment.

Clearly, there are many definitions of investment. So what exactly is investment. To some people, investments might be putting money into the stock market. To some others, the unit trusts, bonds, etc. To another person, an education is also an investment. Raising a kid might be an investment to some as well.

To me, investing is the act of sacrificing something in order to gain something else more worthwhile. It does not necessarily need to include money. Example: spending time to read self-improvement books for free from the library is a form of investment; I gain in getting more insights. Spending the effort to build such a blog/website is also investing; I gain in being able to gather, clarify and put together my thoughts.

Indeed, investment is important. To me, the bulk of investments should be on oneself; the returns are far greater than investing in any stocks, bonds, etc. Education, reading, learning on the job, etc, build upon life skills that may likely be used again and again in the future. This is sort of like a form of compounding; the database in you may grow in a constant rate, but if each piece of data gives you some form of returns at a constant rate as well, the total returns increases in an exponential rate. This is because the data that you possess continue to give you some sort of returns as you build up your personal database. Every piece of new data starts to give you rewards the moment you put it in, together with previous data that continue to provide the rewards.

Not sure if I explained the idea properly, but in short, invest in yourself, invest in building up a personal database. This will be on top of investing time on trading on the stock market (stock market plays are not called investing, but trading).

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