Investment is a way to generate more money to meet financial goals like retirement, buying a home or college education. When you invest, your savings compound over time thanks to interest and dividends, which can help you reach your goals faster.

While the term investment is used to refer to assets like stocks, bonds and cash, it can also refer to any asset that could potentially yield a return over the long run, including property, commodities, precious metals, exchange-traded funds (ETFs) and even art and collectibles. Investors must balance the potential return against the risk of loss when making their investment decisions.

A common investment strategy involves diversifying a portfolio with different assets to limit overall losses and minimize fluctuations in investments’ returns. The idea is that if you have the ability to tolerate short-term volatility, you can invest in more aggressive asset classes that offer higher potential returns over the longer term.

When it comes to choosing when and where to invest, you first need to determine what your investing goals are. Whether it’s saving for retirement or your children’s college tuition, creating a clear plan is a critical step. Once you know what your goals are, you’ll have a better idea of how much to save each month.

Depending on your preferences, you can choose to manage your own investments or go the hands-off route with a professionally managed account, like a target date fund, robo advisor or financial advisor. The key is to find a strategy that matches your goals and your willingness to take on risk.