Looks like I will keep on track of my goals this week, as this is post number 2.

I wanted to try a little something different, and try to generate a discussion on investing, our perception of it, and how different each person’s opinion is.

Recently, defining things has come up in conversation within my family.  It led me to start thinking about the different definitions in my own industry (for those of you who are new, that would be investment management).  I decided to see if there was a definition of “investment” that was federally recognized.  I could not find one.  There is the Wikipedia definition, “Investment is putting money into something with the hope of profit. More specifically, investment is the commitment of money or capital to the purchase of financial instruments or other assets so as to gain profitable returns in the form of interest, income (dividends), or appreciation (capital gains) of the value of the instrument”.  This is pretty general, and on the surface seems fairly accurate.  The following is from the site investorwords.com:

“1. In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means the use money in the hope of making more money.

2. In business, the purchase by a producer of a physical good, such as durable equipment or inventory, in the hope of improving future business.”

Two key things jump out of me from these definitions.  The first thing is the word “hope” is used three times.  This suggests that investing is not an a science or even an art – it is that it is gambling.  There are other definitions and keywords such as “deferred consumption” and “commitment of time”.  Some of which apply to financial investing, some of which don’t.  The second thing that jumps out is the word “purchase”.

It used to be in the world of brokers that investments were sold.  The industry has moved to a more service-based model, where brokers and advisors are selling their expertise, and not their firm’s products (when in some cases they are doing exactly that or both).  This can be both good and bad.  Good, if the advisors and brokers are competent.  Bad, if the recommendation isn’t based on sound judgment and reasonable care.

I don’t want this to be too long for a first post about this.  But I want you to think about the definition of “investing”.  What it means to you.  What you think it means.  The next post will cover more details about what I’m trying to get at, but I’ve come to realization that we are looking at things wrong when it comes to investing.