Investing is a common way for individuals to increase their wealth. In general, it involves placing money into the hands of another business with the hopes that it will produce more money than it costs. However, investing is not without risk, and you may lose your money if the business fails. That is why it is important to know more about what the business is offering and how it functions before investing.

Investing can produce two main outcomes: income and appreciation. Appreciation occurs when an item gains in value over time. For instance, investing in art may not produce any income immediately, but its cultural value could increase ten years down the road. Investing in stocks is similar to spending money wisely, because you hope that the business will increase in value with the money that you have invested.

Value investing ensures that you get your money’s worth. While investing in stocks, you can’t predict when a company will perform well, and the market can fluctuate drastically. If the company is struggling, you might want to get out of the business before it loses too much. And if a company starts using cheaper materials, or lowers its standards, you should pull out. A better strategy is to invest in a slowly growing business.

Investing is very different from putting money in a savings account. Unlike saving accounts, investing involves taking risks that may have a high return. For example, stocks are different from bonds, which are essentially loans made to governments and companies. These bonds must be paid back over time and at specified interest rates.