investing

Investing is the act of allocating money or capital with the expectation of generating income or capital appreciation over time. It is typically pursued to grow wealth, fund goals such as retirement, or outpace inflation. Investing involves risks and does not guarantee a profit; outcomes depend on market conditions, asset choices, and time horizons.

Asset classes form the core of investment portfolios. Common classes include stocks (equities), which seek capital appreciation and sometimes dividends; bonds (fixed income), which provide income and principal preservation with varying risk; cash equivalents, such as money market instruments, for liquidity; real estate; and commodities. Each class has different risk, return, and correlation characteristics, so combining them can reduce overall risk through diversification.

Diversification and asset allocation are central concepts. Diversification means spreading investments across assets, sectors, and geographies to reduce risk. Asset allocation sets target percentages for different asset classes based on a investor’s time horizon, risk tolerance, and goals. Within equities, investors may choose individual securities or pooled vehicles like mutual funds and exchange-traded funds (ETFs).

Investment approaches vary. Passive investing aims to match broad market indices through index funds or ETFs, while active investing seeks to outperform markets through research and selective choices. Costs, taxes, and liquidity affect decisions and outcomes. Long-term investing, regular saving, and practices such as dollar-cost averaging can help manage volatility, though investing carries the possibility of loss, including principal.