Technically, anything that generates a return is an “investment”. This means even your savings account generating 1% interest is an “investment”. However, when most people talk about investing, they are referring to higher return investments like mutual funds, ETFs, and stocks.
Why is investing important?
Investing ensures present and future long-term financial security. The money generated from your investments can provide financial security and income.
One of the ways investments like stocks, bonds, and ETFs provide income is by way of a dividend. This is an amount paid to shareholders simply for holding the investment. Because many investments pay monthly, quarterly, or annual distributions, you can enjoy passive income that ultimately could replace your paycheque.