Investing is the art of making money, with money
For a moment, dismiss the complexity that’s typically associated with the realm of finance and revel in the simplicity of this definition: investing is the art of making money, with money. That’s all investing is.
It involves the deployment of capital (money), with the intent to have more capital once the financial transaction is complete. For example, you start by investing $100, and when you’re all done, you have $120. That $20 represents your investing profit.
Now, notice that I defined investing as an “art”, and not as a “science”. While there are investment formulas and financial analysis methods that could be categorized as “scientific” in nature, there are also numerous unknown variables that prevent the field of investing from evolving into an exact science (e.g., geopolitical events, emerging technologies, etc.).
Science mandates precision. Art opens the door to instinct, perspective, and adaptation. Science is very procedural and structured, and while there’s certainly a procedure to creating and designing art, there’s also a strong creative element. Investing is more art than science; however, investing does contain features from both worlds.
The other point worth highlighting in this definition is that you’re making money WITH money. The implication here is that you’ve got some investment capital to begin with. The good news is that you don’t need a lot of it, and that’s usually a big relief to most folks. Everyone seems to have this preconceived notion that you need hundreds of thousands of dollars to be a productive investor, and that’s simply not the case. Investing is highly scalable; you can start with a few hundred bucks, and you can start with a few million bucks. Whatever works for you and your personal budget.
By the way, the investment capital that I’m talking about doesn’t have to be solely your own. I’m serious. Do you really think Donald Trump only used his own money to build those massive real estate developments? Do you really think Ted Turner only used his own money to amass his media empire? Absolutely not. Investing is the art of making money, with money, and that money doesn’t necessarily have to come from your personal piggy bank. But that’s a discussion for a future blog post…
In closing, investing is nothing more than the art of making money, with money. It’s an art, not an exact science. Moreover, it requires that you have at least a small amount of investment capital to get started, even if that investment capital isn’t yours.
Those are my thoughts. Feel free to share some of yours below. Thanks for reading and as always, make it a great day.