One of the reasons lots of people fail, even very woefully, amongst gamers of investing is that they get involved in it without learning the rules that regulate it. It is really an obvious truth that you can't win a game if you violate its rules. However, you must know the principles when you should be able to avoid violating them. One other reason people fail in investing is because play in the game without being aware what it is all about. That is why it is important to unmask the meaning in the term, 'investment'. What is an investment? An investment can be an income-generating valuable. It is vital that you simply be aware of every word in the definition because they're critical in understanding the real specification of investment.
Through the definition above, there are 2 key popular features of a great investment. Every possession, belonging or property (you have) must satisfy both conditions before it could qualify for being (or perhaps be called) a smart investment. Otherwise, it'll be something besides a good investment. The initial feature of your investment would it be is often a valuable - something is incredibly useful or important. Hence, any possession, belonging or property (of yours) that has no value is just not, and can't be, a smart investment. With the standard with this definition, a worthless, useless or insignificant possession, belonging or property is not an investment. Every investment has value which can be quantified monetarily. In other words, every investment carries a monetary worth.
The 2nd feature of your investment is always that, not only is it a priceless, it must be income-generating. Which means it needs to be able to make money for the owner, or at least, conserve the owner in the money-making process. Every investment has wealth-creating capacity, obligation, responsibility and performance. It is really an inalienable feature of your investment. Any possession, belonging or property that cannot earn cash to the owner, or at least assist the owner in generating income, just isn't, and should not be, a smart investment, regardless how valuable or precious it might be. Moreover, any belonging that can't play any of these financial roles is just not a great investment, no matter how expensive or costly it might be.
There exists another feature of the investment that is closely in connection with the other feature described above that you simply should be very alert to. This may also help you recognise if the valuable is definitely an investment or otherwise. A great investment that does not generate take advantage the strict sense, or help in generating income, saves money. This investment saves the property owner from some expenses however have already been making in its absence, even though it may do not have the capability to attract some money on the pocket in the investor. By so doing, an investment generates money for your owner, though away from the strict sense. Put simply, an investment still performs a wealth-creating function for the owner/investor.
Usually, every valuable, in addition to being something which is very useful and important, should have the capacity to generate profits for the owner, or cut costs for him, before it can qualify to get called an investment. It is crucial to emphasise the other feature associated with an investment (i.e. a good investment to income-generating). The reason behind this claim is that a lot of people consider only the first feature of their judgments on the constitutes a good investment. They understand a good investment simply as being a valuable, even if the valuable is income-devouring. This kind of misconception typically has serious long-term financial consequences. They often make costly financial mistakes that cost them fortunes in daily life.
Perhaps, among the causes of this misconception could it be is suitable in the academic world. In financial studies in conventional educational facilities and academic publications, investments - otherwise called assets - talk about valuables or properties. This is why business organisations regard almost all their valuables and properties for their assets, even though they do not generate any income on their behalf. This understanding of investment is unacceptable among financially literate people since it is not simply incorrect, but in addition misleading and deceptive. For this reason some organisations ignorantly consider their liabilities his or her assets. This is also why some people also consider their liabilities his or her assets/investments.
It's a pity that many people, especially financially ignorant people, consider valuables that consume their incomes, along with generate any income for the children, as investments. Such people record their income-consuming valuables one of several their investments. Those who accomplish that are financial illiterates. This is the reason they have no future inside their finances. What financially literate people describe as income-consuming valuables are considered as investments by financial illiterates. This shows a positive change in perception, reasoning and mindset between financially literate people and financially illiterate and ignorant people. This is why financially literate folks have future in their finances while financial illiterates do not.
From your definition above, one thing you should consider in investing is, "How valuable is what you need to acquire using your money just as one investment?" The larger the value, as much as possible being equal, better a purchase (although the higher the expense of the acquisition might be). The other factor is, "How much does it generate to suit your needs?" When it is an invaluable but non income-generating, then it is not (and cannot be) a great investment, naturally that it can't be income-generating when not an invaluable. Hence, if you can't answer both questions in the affirmative, then what you're doing is not investing and what you are acquiring can not be an investment. At best, you may be having a liability.