There were some good answers to yesterday's question about investing that showed at least people reading the blog have given the subject some thought. Too bad more people either weren't reading or commenting!
Either way, here's my definition: I think investing is any activity that involves the carefully considered allocation of your resources with the goal of appreciation over the long-term.
A few important points: Note I said "carefully considered". This is one of the biggest ways that investing differs from say, casino gambling or its close cousin, day-trading. Investing is strategic and is not done without planning for your goals and how much money or time you have to devote to them. If you're just pouring money into the market with the ONLY goal to have more money tomorrow, you're leaning more toward gambling than investing.
Also note that I said "resources" and not just money. On this blog, of course, the resource I talk about is money but there are many other resources with which to invest. Time is probably the most important one. If you're taking time out of your day to read this blog, you're making an investment in gleaning what you can about personal finance from my observations. You can invest in your education, your home, your children. The point is you're devoting a resource that's limited (time or money), which makes it valuable, and in exchange you expect an output worth more than what you put in.
My final point is that in most cases, investing is done over the long term. There's a commercial for one of the big brokerages that shows two runners: one is slow and steady, while another guy speeds past him. By the end of the commercial they've gone a few miles and you see the fast guy bent over, tired as hell, unable to make it over a big hill. Slow guy passes him.
Get the point? For most investors the point isn't getting rich fast. It's watching your capital appreciate over the long-term through steady, consistent practices. Too often those who are in a rush to make a bunch of money end up losing, like the runner who can't make it over the hill or the day-trader who's kicking himself right now for going long in mortgage-backed securities. Those who win are the ones who keep making the same contributions to their 401(k) plans for decades, making only the necessary adjustments and not worrying about temporary fluctuations in the market.
So now that you've read my definition of investing, has your opinion changed? is there anything you'd add or that you disagree with?
Coming later: Two pledges you should take and why Barack Obama should build trains.