Investment

What it is:

An investment is an asset intended to produce income or capital gains.

How it works/Example:

Investments can be stocks, bonds, mutual funds, interest-bearing accounts, land, derivatives, real estate, artwork, old comic books, jewelry -- anything an investor believes will produce income (usually in the form of interest or rents) or become worth more.

Why it Matters:

The safety of the principal is of concern in any investment, although some investors are more risk tolerant than others and are thus more willing to lose some of their principal in return for the chance of generating a higher profit. The investor's ability to tolerate risk and the incremental return associated with increasing amounts of risk are two primary factors that distinguish types of investments from one another and help determine appropriate investments for a given investor.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.