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What is an Investment: Meaning and Types

June 30, 2020 by Finance

Probably the most talked-about issue in almost every scene in Nigeria is on what to do with finances. Most people appear to be talking about creating wealth, and when that discussion is over, another one on how to create more wealth is taking its place. Everyone seems to be saying ‘invest, invest, invest’, and it can get a little overwhelming. This article, shall be breaking down any myths about investments, and give insight on what options you can consider. 

What is an investment?

An investment is the sacrifice of the present value of an asset for future profit. In simpler terms, investment involves converting an asset (usually cash) into a form that is intended to increase its value. Consider this example. Suppose Akin has a cash balance of about =N= 500,000 and he puts this cash into a fixed deposit scheme with an interest of 5% at his bank for 12 months, it means that in a year, Akin’s =N= 500,000 will increase in value. Akin has created more wealth for himself. This process is referred to as an investment.  Check out this post to see how to calculate the fixed deposit interest rate in Nigeria.

Why do people invest?

The reasons for investing are quite universal. People invest to increase their wealth and therefore their financial status. By investing, you increase the value of your assets after they have appreciated over time and with interest. 

What can I invest in?

 There are a lot of things you can invest in; the possibilities are quite endless. However, investments come with risks, and if you are to put in your money into something, then it must be the best possible option. Being safe should always be a priority. Investment is not gambling, after all. A few investment options you can consider safely include:

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Shares:

Shares are units of a company or organization that give the right of ownership when bought. They represent ownership in a company. The more shares you purchase and own equals the amount of ownership you have in the company. Shares increase or decrease in value depending on the financial performance of the company in its industry. You can view which shares to buy on the Nigerian Stock Exchange, or contact your bank to help with purchases. Brokers and agents are also helpful. 

Property: 

Property investment is not often talked about, but it is a valid means of investing like any other. You can invest in property by buying or building and then leasing or renting it out to others. It might be an expensive option, but its dividends usually compensate for that. 

Mutual funds:

You can refer to this as a form of group investing. Various individuals pool their resources together, and a fund manager helps invest these assets, making profits for the members of the mutual fund. You can refer to this post to learn more about mutual funds in Nigeria.

How do I invest?

You only need a few steps to start investing. They are;

  • Choose your budget
  • Choose what you want to invest in
  • Invest
  • It’s as simple as that. 

Conclusion

Investments are a sure way to grow your wealth, especially if you have extra cash to spend. Your investment could be short term, mid-term or long term. Depending on how long you want it to be. So long as you monitor your investments and are not hasty about it, investments can be a tremendous financial boost. 

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Looking to invest right away? Here are some investment opportunities worth considering in Nigeria.

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