Shayne Heffernan on Investments

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To invest is to allocate money (or sometimes another resource, such as time) in the expectation of some benefit in the future.

In finance, the benefit from investment is called a return. The return may consist of capital gain and/or investment income, including dividends, interest, rental income etc. The projected economic return is the appropriately discounted value of the future returns. The historic return comprises the actual capital gain (or loss) and/or income over a period of time.

Investment generally results in acquiring an asset, also called an investment. If the asset is available at a price worth investing, it is normally expected either to generate income, or to appreciate in value, so that it can be sold at a higher price (or both).

Investors generally expect higher returns from riskier investments. Financial assets range from low-risk, low-return investments, such as high-grade government bonds, to those with higher risk and higher expected commensurate reward, such as emerging markets stock investments.

Investors, particularly novices, are often advised to adopt an investment strategy and diversify their portfolio. Diversification has the statistical effect of reducing overall risk.