Many people use both terms interchangeably, but they are in fact different. The term financial investment is a broad concept that has both financial and economic definitions. As part of their investment strategy, investors must first determine their risk tolerance by evaluating how comfortable they are with making different types of investments. Generally speaking, the higher the risk that an investor takes, the higher the reward a financial investment could return. This determines how they are combined in a portfolio. These investments are held for a specific interval of time that is called a time horizon.Īs an example, an employee beginning a career could hold onto retirement investments for a few decades, while an investment firm may hold and sell an investment within a few days.įinancial investments could involve one or many different types of assets that are usually bought or sold based on a specific investment strategy. A financial investment is a financial product like a cryptocurrency or a stock that is bought with the goal of making money.Įach investment has specific risks, advantages and disadvantages that will determine how and when investors buy or sell them.īoth individuals and companies make financial investments with the intent of maximizing income or earning a profit.
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