I’d like to take a minute of your time for a definition. It’s a word you’ve heard before, and you know what it means (to you, anyway), but this way you will know what I mean when I use it.
Investing: Spending money with the reasonable expectation of getting more money back.
So then, bonds are an investment because you get paid interest, and the value of the bond may also go up.
Stocks are usually an investment, assuming you do enough research to decide there is a reasonable expectation of profit, either through dividends or capital gains. You don’t buy a stock expecting it to lose money, do you?
Life insurance is not an investment. You have to die to collect!
The Lottery is not an investment. It is not reasonable to expect to hit the big jackpot.
Real estate might or might not be an investment. It depends on your situation and point of view. I’m sure I’ll have the occasion to discuss that another day.
That business venture your relative goes on about might or might not be an investment. I haven’t seen his prospectus, and I sure don’t know him like you do.
By way of follow-up regarding last week’s FOMC rate cut, subscribers to RealMoney can check out an excellent commentary by Aaron Task. In a much more multifaceted and eloquent way, he sums up why he feels the rate cut was unnecessary, if not outright dangerous to the long term health of the economy.