What are Investing Activities?

Alexis W.

Investing activities is a term for a broad group of activities that encompasses any money spent on something likely to increase in value. Most commonly, investing activities involve the purchase of stocks, bonds, certificates of deposit, mutual funds, or real estate. Investment activities can also include putting money into a savings account, or even investing in art or other tangible goods that the individual believes is likely to rise in value.

Investing activities often involve the purchase of stocks.
Investing activities often involve the purchase of stocks.

When money is spent, it can be spent on either assets or liabilities. A liability is something that does not increase in value. For example, money spent to buy a pizza, a coffee table, or a new car, is generally not considered an investment or an investment activity. The money invested in this item is spent, and the item is not going to increase in value or provide a return on your initial expenditure.

Some purchases, however, are designed to provide you with a return on your investment. A return on your investment means that the initial investment is ideally going to grow or to give you back more than you put into it. The increase in money, or the return on the investment, can come from interest paid, from a rise in the price of the stock or mutual fund, from dividends paid by the company, or from the actual value of the asset itself increasing. For example, if a given stock is bought for $10 US Dollars (USD) per share and then it rises in price to $11 USD per share, the individual experienced a $1 USD return on his investment, or a 10 percent return on his investment. If a piece of real estate is purchased for $100,000 USD and the value on the market rises to $150,000 USD, the individual received a $50,000 USD return on his investment, or a 50 percent return.

Investing activities are an important part of financial planning. A person's investing activities should ideally produce sufficient income for that individual to live off of in retirement when he is no longer earning a paycheck. For example, if an individual wishes to be able to live on $50,000 USD per year, then most experts recommend he save enough that the return on investment — in the form of interest or other income paid — be enough to generate that $50,000 USD so he does not have to touch the principal of his investments. As such, when engaging in investing activities, it is important both to devote a sufficient sum of money to reach investment goals and to research investments carefully to ensure they are wise investment vehicles.

You might also Like

Readers Also Love

Discuss this Article

Post your comments
Forgot password?