From the definition above, there are two key features of an investment.
Every possession, belonging or property (of yours) must satisfy both conditions before it can qualify to become (or be called) an investment. Otherwise, it will be something other than an investment. The first feature of an investment is that it is valuable – something that is very useful or important. Hence, any possession, belonging or property (of yours) that has no value is not, and cannot be, an investment.
By the standard of this definition, a worthless, useless or insignificant possession, belonging, or property is not an investment. Every investment has the value that can be quantified monetarily. In other words, every investment has monetary worth.
The second feature of an investment is that, in addition to being valuable, it must be income-generating.
This means that it must be able to make money for the owner, or at least, help the owner in the money-making process. Every investment has wealth-creating capacity, obligation, responsibility, and function. This is an inalienable feature of an investment. Any possession, belonging, or property that cannot generate income for the owner, or at least help the owner in generating income, is not, and cannot be, an investment, irrespective of how valuable or precious it may be. In addition, any belonging that cannot play any of these financial roles is not an investment, irrespective of how expensive or costly it may be.
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There is another feature of an investment that is very closely related to the second feature described above which you should be very mindful of. This will also help you realise if a valuable is an investment or not. An investment that does not generate money in the strict sense, or help in generating income, saves money. Such an investment saves the owner from some expenses he would have been making in its absence, though it may lack the capacity to attract some money to the pocket of the investor. By so doing, the investment generates money for the owner, though not in the strict sense. In other words, the investment still performs a wealth-creating function for the owner/investor.
As a rule, every valuable, in addition to being something that is very useful and important, must have the capacity to generate income for the owner, or save money for him, before it can qualify to be called an investment. It is very important to emphasize the second feature of an investment (i.e. an investment as being income-generating). The reason for this claim is that most people consider only the first feature in their judgments on what constitutes an investment. They understand an investment simply as a valuable, even if the valuable is income-devouring. Such a misconception usually has serious long-term financial consequences. Such people often make costly financial mistakes that cost them fortunes in life.
Perhaps, one of the causes of this misconception is that it is acceptable in the academic world.
In financial studies in conventional educational institutions and academic publications, investments – otherwise called assets – refer to valuables or properties. This is why business organizations regard all their valuables and properties as their assets, even if they do not generate any income for them. This notion of investment is unacceptable among financially literate people because it is not only incorrect, but also misleading and deceptive. This is why some organizations ignorantly consider their liabilities as their assets. This is also why some people also consider their liabilities as their assets/investments.
It is a pity that many people, especially financially ignorant people, consider valuables that consume their incomes, but do not generate any income for them, as investments. Such people record their income-consuming valuables on the list of their investments. People who do so are financially illiterates. This is why they have no future in their finances. What financially literate people describe as income-consuming valuables are considered as investments by financial illiterates. This shows a difference in perception, reasoning, and mindset between financially literate people and financially illiterate and ignorant people. This is why financially literate people have a future in their finances while financial illiterates do not.
From the definition above, the first thing you should consider in investing is, “How valuable is what you want to acquire with your money as an investment?” The higher the value, all things being equal, the better the investment (though the higher the cost of the acquisition will likely be). The second factor is, “How much can it generate for you?” If it is valuable but non-income-generating, then it is not (and cannot be) an investment, needless to say, that it cannot be income-generating if it is not valuable. Hence, if you cannot answer both questions in the affirmative, then what you are doing cannot be investing and what you are acquiring cannot be an investment. At best, you may be acquiring a liability.