Investment is something that everyone practises. Even the act of putting a rupee in your piggy bank and saving it when you were young. Then investing this money to buy that cool lego set or those shiny new sneakers you wanted. This is investing explained in simpler terms.
But, when you talk about investing in the corporate world, it gets a tad bit more complex. The jargons used changes as do the ways of investing. There are newer ways of investing that come up every single day. Some of these are genuine and some of them are not. There are some with high risk and some are very secure with minimum risk. Some places offer you such returns on investments, which if happened in real life would make you a millionaire in a month. Only for those companies to fail miserably and with all the money lost. Or for the companies to be fraud.
If you have ever seen Hera Pheri (an Indian movie), you must have come across the scene where Akshay Kumar was lured into the 25 din mein paisa double scam (in 25 days the money will be doubled). In the greed for quick and easy money he ends up investing about 1 crore all of which he ends up losing as it was a scam.
Investment
However, not all investments are scams. There are many legal and safe ways of investing money. Many people think that saving and investment are the same. But, there is a difference. In the earlier example, you had saved up money to invest in a toy you like. But in the corporate sense, investing money means investing your money in something for it to grow. Nowadays not only companies but even individuals have started investing.
There are many ways for an individual to invest as well. One can invest in cryptocurrency, buy stocks of a company, bonds, mutual funds etc.
Investments for individuals
For a brief summary of some investment types: Cryptocurrency is a digital currency. It is a very high risk and volatile market. The fluctuations in the price can happen every minute. So, you will either end up gaining or losing a lot of money.
Buying stocks of a company means you become a fractional owner of the company you purchase a share of. So, if the market goes up your investment grows and if the market falls/crashes the investment return will be very less. One ideally buys the stock of the company when they feel like the market is going to go up. When this happens, it brings a hike in the value of the company assets as well.
Bonds are utilized by the government or the companies to raise the money. This is done by borrowing money from the investors. In return for borrowing the money, the bond issuer makes a commitment to pay the investment back over time with interest.
Mutual funds is a company. This company will take money from various investors and collect it. Then they will invest this money in stocks, short-term debts and bonds. This combination of the investment made by the mutual funds is known as its portfolio.
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