Are you one of those confused about the difference between a business and an investment, especially when it comes to having an online business? Again, do you know that an asset can be both a business and an investment? This post will answer all your questions.
Do you know that stock can be both an investment or a business depending on how you got into it?
To see how this can happen let’s explain what investment and business is. First, let’s take investment and ask Wikipedia for the definition. Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income, or appreciation of the value of the instrument.
Whew! Ok, let’s speak that in English. Investment is simply putting money in something in the hope of making a profit in the future. You can invest many things apart from money like we saw in the book, but we are concerned with the investment of money. There are so many examples of investment like real estate, stocks, bonds, mutual funds, forex, etc.
What is a business?: A business is an organization or corporation that provides goods and services and makes a profit as a result. We have an internet business, retail (buy&sell) business popularly known as mom &pop shop and others as examples of business.
Now the main difference between investment and business is that if you have a business, you may or may not be a full participant. Though in the beginning, you will be participating fully, to get your business off the ground. But in investment, you don’t have to work there your money works for you. You put the money and go away to wait and watch …and pray.
Using stock as an example, if you have a stockbroking firm, you are in the stock exchange business. While if you invest in some companies through your stockbroker you are an investor. Also, if you own a real estate agency, you are a businessman but if you buy lands or houses in the hope of selling them in the future you are investing in real estate.
That is what I mean when I say that an asset of yours can be a business for you or an investment. It totally depends on what you want to use it for. You can see real estate can be a business and also be an investment. Or that you can be in the stock business and also be an investor in stocks. What’s more, you can do both online.
Business usually generates the money for investment. Though there are other ways you can generate money from your investment needs like inheritance, salary, wages, gratuities, etc, but the most popular ones is by using the profit made from your business.
Both avenues can make you money, both are great ways of making millions. It depends on what you really want for yourself. If you can, do both – have a business and have some investments. If not concentrate on the one you want. If you don’t want to work so hard, you have to consider an investment. If you don’t mind the initial hard work, start with building a business.
To me starting with a business and going on to investment will make you wealthy faster. This is because you have more money from your business to invest. But if you have a good job you love right now, and a certain percentage of your salary is invested in a good investment vehicle. You might want to use investment as a means to wealth while having fun in your job.
What do you think? Do you have an asset that is both an investment and a business? Share your thoughts below in the comments section.
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NB: This post originally appeared on Nov 2010 and it has been updated on Aug 2018.