To invest is basically to put money into an investment with the hope of eventually getting a return/profit from that investment. Simply put, to invest simply means owning something or an asset with the intent of making money off of the investment or the increase of the value of that investment over a specified period of time. There are many different ways to invest and it is usually up to the individual to identify what they think will be a good investment for them in the future.
The three most common investment types are equity, fixed income and ex-ante investment. Equity investment includes things such as stocks, bonds, mutual funds, property, automobiles, businesses and more. Fixed income investments include money market accounts, treasury bills, CDs, savings accounts, money market funds, bonds, annuities, options, commodities, stocks and more. Ex-ante investment refers to any investment in securities that are brought about by borrowing money (exchange traded funds) or borrowing from another firm (second mortgage, line of credit, commercial real estate loans).
As an example, let’s say you have money in your savings account that you plan on investing in stocks. You determine that interest rates will stay lower for the next few months and therefore you want to purchase some stocks. So you decide to purchase some bonds that are presently experiencing lower interest rates. This will generate income for several months while your stocks continue to do well. The key here is that you borrow the money you use to make the investment from a current account with a lower interest rate than your saving account. You will generate income for quite a while the stocks continue to perform poorly, but after a year or two, the stocks will begin to perform significantly better due to the interest earning on your loan’s going down.