What is Investment?

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It seems everyone understands the meaning of the word “investment”, but its exact explanation can be complex if you want to study it deeply. What is the investment? Is buying a stock an investment? Is buying a house an investment? Is buying a new car an investment? Is investing in a factory an investment?… The answers may be different according to your individual situation.

Gain More Purchasing Power in the Future

Some people say that making more and more money is the investment. However, if I took the 1,000 US Dollars in my pocket and exchanged it for 135,000 Japanese Yen or 400,000 Zimbabwe dollars, it would be a lot of money. I am afraid that my family would not say that my investment was successful, but they would worry about my brain problem and would take me to see the doctor.

I think you would agree that money is just a piece of paper. But today, as electronic payment is so popular, money is not even paper, but a string of electronic symbols. The reason you fall in love with her is not because of her beauty, nor because of her figure, but simply because she can get what you need. 

Therefore, making the numbers displayed on a piece of paper larger and larger, or making a string of electronic symbols longer and longer, is not necessarily an investment in itself. The real investment is to increase the purchasing power you have. The investment guru Mr. Warren Buffett says: “Investing is giving up consumption today in order to be more able to spend in the future.”

According to this definition, the same behavior, some may be an investment, while some may not be an investment. The point is, will investing today will give you more purchasing power in the future? If so, it’s an investment. 

For example, if someone buys a new car to run Uber, that is an investment. In order to make your partners have confidence in you, buying a new car is also an investment. And if you buy a car just to drive out, then it is consumption instead not investing, because the purchasing power paid out will never come back. 

Not only buying a car, but raising children can also be an investment. Those parents who hold the mentality of “raising children to take care of them when they’re old”, behind the family affection, are also doing “business” of throwing a mouthful of porridge today, hoping to exchange a piece of meat in the future.

Is purchasing a car and operating Uber guaranteed to be profitable? Is purchasing a new car guaranteed to increase your business profits? Is having children a surefire strategy to ensure your well-being in old age? I’m afraid not. Investment is an “intent” to gain more purchasing power in the future, but whether this “intent” can become a reality is limited by many factors. The so-called “Imagination comes true” is just a blessing, a fairy tale world in a dream.

Stock Market: Engage or Stay Away?

Most people come to the stock market with the “intent” to exchange their existing purchasing power for more purchasing power in the future, but whether this “intent” can be realized is also limited by many factors.

Most people enter the stock market because they see that the stock market is hot, and they hear people around them talking about making money through buying and selling stocks. It seems that it only takes two keystrokes: one time to buy, one time to sell, and the money rolls in. 

Many people are excited or curious when they see people around them making money in the stock market, believing that this “exchange” conduct is really simple, and then they open an account and enter the market naively.

Those investors don’t know anything at first, and they tend to chase after seeing what goes up well. Due to the hot stock market, new funds are constantly being attracted into the market, and the result may be that everything goes up, and you can make money just by listening to the news or buying and selling by feeling. 

Therefore, investors who have just entered the market can easily think that the return on investment comes from the jumping up and down numbers on the computer or mobile screen – just as the son of a rich man finally understands that after careful observation and thinking, rice is originally produced in rice jars.

After a large number of people who completely have no understanding of the market also buy stocks, and the lack of fresh funds to continue to push the numbers on the screen, the decline will inevitably come. 

During the brutal fall, the wealth vanished like a nightmare. After waking up, doubts about life are inevitable. Therefore, in the eyes of many people, the stock market is not a place for serious people to do serious things, and it may even be a scam, casino, money shredder, or a gold-selling cave. Ordinary people should “cherish life and stay away from the stock market.”

Is this perception correct? Should ordinary people participate in the stock market? If so, how can we ensure that our wealth grows instead of wasting time in a “casino” or losing our hard-earned money? The content of this website are all about these topics.

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