Investing for the future: What is an Investment?

Definition of Investment " investing for future"

An investment is essentially an active approach to growing wealth involving taking risks with an anticipation of rewards. By definition, an investment is the allocation of money or resources to acquire an asset that is expected to increase in value over time and generate profit. There are several investment platforms you can check out such as Ndovu that guide beginner investors along their financial journey. Ndovu helps you find out what type of investor you are and also provides insightful financial information to guide your investments.

The Importance of Investing

Investing is crucial for several reasons:

1. Wealth Accumulation: Investment is focused on multiplying your money over time allowing you to accumulate more money than you could by only saving.

2. Inflation Protection: Inflation erodes the purchasing power of money over time. Investing using platforms like Ndovu wealth Limited helps protect your money by providing returns that grow faster than the rate of inflation.

3. Retirement Planning: Investing is key to building a retirement fund. It is important to have a healthy balance of investing and saving to create a robust retirement plan. This is because relying solely on your savings may not maintain your desired retirement lifestyle.    

4. Financial Goals: Investment can help you fast-track and achieve financial goals like buying a home, funding your education, or starting a business.

Types of Investments

There are various types of investments, each with its own risk and return profile. Here are some of the most common ones:

1. Stocks

Stocks represent ownership of a portion of a company. When you own stocks in a company you become a shareholder in that company. The value of stocks fluctuates based on a company’s performance and market conditions.

2. Bonds

Bonds are debt securities issued by governments, municipalities, or corporations. When you invest in a bond you are loaning money to the issuer in exchange for regular interest payments and return of the bond’s face value at maturity. Bonds are ideal for investors seeking low-risk and steady-income investments.

3. Mutual Funds

These are funds that are managed by professional fund managers and they pool money from investors to invest in a diversified portfolio of stocks, bonds, and other securities.

4. Exchange-traded funds (ETFs)

ETFs offer the benefits of diversification like mutual funds but trade on stock exchanges like individual stocks. They offer the benefits of professional management and the flexibility of trading throughout the day.

5. Real Estate

Real estate investing is about buying, selling, managing, or owning properties for profit. Real estate can provide value in terms of rental income or capital gain.

6. Commodities

Commodities include physical assets like gold, silver, oil, and agricultural products. Investing in commodities can hedge against inflation and provide diversification. However, commodity prices can be highly volatile due to supply and demand factors, geopolitical events, and economic conditions.

7. Cryptocurrencies

These are digital currencies that use cryptographic security on the blockchain. Some examples are Bitcoin, Ethereum, and Solana. Cryptocurrencies offer higher returns but come with a lot of risk and volatility. 

Risk and Return

Every investment comes with a degree of risk. Investments with higher rewards tend to come with more risk. This is why before investing it is important to determine your risk tolerance in order to know which assets to invest in. Practicing diversification in your investing will help manage risk and improve potential returns.  

Investing is a powerful tool for building wealth, achieving financial goals, and securing your financial future. Understanding the different types of investments and the risks and rewards that come with them will help you make informed decisions aligned with your financial goals. For more information about investing check out the Ndovu Academy where you will find loads of information about investing.

Disclaimer:

All ETF products are subject to risk, including country/regional, liquidity, and currency risks. Market prices of securities within the ETF may rise and fall, sometimes rapidly and unpredictably. While ETFs provide diversification through exposure to a basket of securities, they do not eliminate the risk of loss. Diversification does not ensure a profit or protect against a loss. These are non-cis products and are registered by the SEC.

Disclosure:

Ndovu is a regulated Robo-advisory platform operated by Ndovu Wealth Limited (‘NWL’). NWL is a Fund Manager licensed by the Capital Markets Authority (Kenya).

The information provided on this platform and the products and services offered are intended solely for persons in regions and jurisdictions where such distribution and utilization are in accordance with local laws and regulations. Ndovu does not promote its services in regions where it lacks the necessary licenses; It is exclusively available to persons residing in countries where it holds a valid license or has regulated partners. Ndovu does not extend its services to citizens of the United States, Canada, Japan, and other restricted territories.