Investment: What It Is, Types, and Real Life Examples

Let's start with the most basic question.

You work hard. You earn money. After covering your living expenses, you have some left over. Now what? You could keep it in a drawer. You could put it in a savings account. Or — and this is where investment comes in — you could put that money to work so that it earns you even more money over time.

That is the essence of investment. An investment is an asset or item acquired with the goal of generating income or appreciation — meaning its value grows over time. You are not buying it to use today. You are buying it because you believe it will be worth more, or generate income, in the future.

In financial terms, as the economist Fisher defined it, investment is a commitment of funds made in the expectation of some positive rate of return. The expectation of return is not just a nice bonus — it is the entire reason anyone invests in the first place. If there were no expectation of return, why would anyone put their money at risk?

And that brings us to the most important concept in all of investing — the relationship between risk and return. Because future returns are never guaranteed, there is always a possibility that the actual return you receive is lower than what you hoped for. That gap between expected and actual return is what we call investment risk. The higher the potential return, the higher the risk you usually have to accept. The lower the risk, the lower the return you should expect. These two forces are permanently linked — you cannot separate them.

It is also worth noting that investment is not only about money. Spending years studying to become a doctor or engineer is an investment — you are committing time, effort, and often money today in the expectation of significantly higher earnings in the future. Building skills, gaining knowledge, developing expertise — these are all forms of investment too.

The concept of investment is far older than most people realize.

The Amsterdam Stock Exchange, established in 1602 by the Dutch East India Company, is considered the world's oldest stock exchange. It was here that shares were first publicly issued — allowing ordinary people to invest in a company and share in its profits. This was a revolutionary idea at the time.

In the early 1900s, buying and selling stocks and bonds became more widespread — though it was often viewed skeptically and even described with terms suggesting speculation and gambling. It was only in the latter half of the 20th century that the language evolved — and the terms once used to describe financial speculation shifted to more specifically refer to high-risk ventures, while mainstream investing became recognized as a legitimate and essential financial activity.

Two names stand out in the history of modern investing. Benjamin Graham wrote his landmark work "Security Analysis" in the aftermath of the 1929 Wall Street Crash — establishing the intellectual foundations of value investing that are still widely used today. And Warren Buffett, Graham's most famous student and the world's most celebrated investor, has consistently demonstrated over decades that patient, disciplined, long-term investing genuinely works. In March 2013, Forbes Magazine ranked Buffett second among the world's 400 wealthiest people — a position built entirely through investment, not through inheriting wealth or running a traditional business.

The investment world is vast. But let's focus on the most important and commonly used types that are most relevant for investors in Bangladesh and beyond.

1. Investment in Shares (Stock Market)

Buying shares is one of the most popular forms of investment for individual investors — and also one that requires careful research and understanding.

When you buy a share or stock in a company, you are literally buying a small piece of ownership in that company. You become a shareholder. As a shareholder, you participate in the company's success — when the company grows and becomes more valuable, your shares become worth more. Many companies also pay regular dividends — a portion of the company's profits distributed to shareholders.

The challenge is that share prices fluctuate constantly based on company performance, market conditions, economic news, and investor sentiment. Even after extensive research, prices can move in ways that surprise experienced investors. This is what makes share investing potentially rewarding but also genuinely risky.

Example: Imagine Mr. Jamil wants to invest some of his savings in shares of Prince Group. By purchasing those shares, he becomes a partial owner of the company. He gains the right to receive dividends based on his investment amount — but he also accepts that if the company faces losses, the value of his investment could fall. The potential for both gain and loss comes with the territory.

2. Investment in Bonds

If shares feel too risky for you, bonds offer a more conservative alternative — though with correspondingly lower returns.

A bond is essentially a loan that you give to a company or government. When you buy a bond, you are lending money to the issuer — a corporate or government entity — who promises to repay you the full principal amount when the bond matures, plus regular interest payments along the way. The issuer gets the capital they need, and you get a predictable stream of income.

Bonds are generally considered safer than shares because the repayment terms are defined upfront. However, they are not entirely risk-free — the issuer could default, interest rates in the broader market could change, or the bond may not be listed on a stock exchange. It is always wise to consult an experienced broker before investing in bonds.

Example: Mrs. Tania wants to invest some money in bonds. She needs to review the bond prospectus carefully — understanding the interest rate, repayment timeline, whether the issuer is reliable, and whether the bond is listed on a stock exchange. A good broker can help her navigate all of these questions before she commits any money.

3. Investment in Mutual Funds

For people who want to invest but do not have the time or expertise to manage their own portfolio of stocks and bonds, mutual funds offer an excellent solution.

A mutual fund pools money from many individual investors and deploys it across a diversified range of investments — stocks, bonds, money market instruments, and other securities — managed by professional fund managers. The income generated is distributed back to investors according to a defined scheme. The key advantage is diversification — your money is spread across many different assets, so a poor performance by one does not destroy your entire investment.

For beginners especially, mutual funds are often the most practical starting point. You can start with a relatively small amount, benefit from professional management, and gradually increase your investment as you become more comfortable.

Example: Zahid is a college student who wants to invest some of his pocket money savings. He discovers he can start a mutual fund investment with a very small amount. He needs to understand the tax implications and the fund's policies first — but the barrier to entry is low enough that even a student can begin building an investment habit.

4. Investment in Real Estate

Real estate is one of the oldest and most trusted forms of investment — and in Bangladesh, it remains one of the most popular.

Real estate investment includes buying commercial property, residential apartments, land, or plots — with the goal of generating rental income, reselling at a profit, or both. The fundamental reason real estate holds its appeal across economic cycles is that property values tend to increase over time, even during periods of inflation and economic slowdown. The physical, tangible nature of real estate also gives many investors a sense of security that purely financial instruments cannot match.

In Bangladesh specifically, real estate investment has historically delivered strong returns, particularly in urban areas like Dhaka and Chittagong where demand for housing and commercial space continues to grow.

Example: Mr. Rahim has been running his business successfully for many years. He now wants to invest his accumulated earnings in a safe, reliable sector. He contacts a reputable real estate company and purchases a commercial space. His plan is straightforward — earn regular rental income from the space, and if needed, sell it later at a higher price. He is reasonably confident that both outcomes are achievable.

5. Investment in a Company or Business

Some investors prefer to put their money directly into businesses — either at the startup stage or into established companies looking to expand. This type of investment can be highly rewarding but also carries significant risk.

There are two main types of business investors. Angel investors are individuals who invest in early-stage startups or even just promising business ideas — often before the business has generated any revenue. They take on high risk in exchange for equity in the business and the possibility of significant returns if it succeeds. Venture capitalists, on the other hand, are professional investment organizations that typically invest in companies that are already operating and showing potential — providing capital to help them scale significantly.

Example: Mahi is a university student with an exciting business idea but no funding. A senior student at his university is known for investing in interesting new ventures. Mahi presents his idea, the senior is impressed, and an angel investment deal is made. Meanwhile, Mr. Morshad runs an established clothing business and wants to open several new showrooms. He reaches out to venture capitalists, presents his expansion plan, and secures a significant investment commitment — without the complexity of a traditional bank loan.

6. Alternative Investment

Alternative investments sit completely outside the world of stocks, bonds, mutual funds, and real estate. They include antiques, paintings, stamps, rare books, limited edition comics, vintage watches, rare coins, and other collectibles whose value tends to appreciate significantly over time.

Alternative investments can be extraordinarily lucrative — but they require specialized knowledge. Without deep expertise in a particular category, it is very easy to overpay for something that turns out not to be as valuable as expected. The valuation process is also more complex and subjective than for conventional financial assets.

Example: Sojib is a passionate collector. Over the years he has accumulated stamps, watches, and coins — enjoying them both as hobbies and as investments. One afternoon in a park, he spots a child playing with what appears to be an antique British coin. He immediately recognizes its significance and buys it for 500 taka. He knows that the same coin could be sold to a fellow collector for at least 10,000 taka that very day. His specialized knowledge turned a casual encounter into a tenfold return in minutes.

7. Investment in Commodities

Commodity investment means investing in raw materials and primary agricultural products — things like oil, natural gas, gold, grains, livestock products, and industrial metals. It also includes financial instruments and currencies tied to commodity prices.

Commodity investments often involve futures contracts — legal agreements to buy or sell a specific commodity at a predetermined price on a future date. This makes them particularly useful for businesses that want to lock in prices and manage supply chain costs.

Example: Mr. Johnson, an American investor, has observed that jute products from Bangladesh have consistent demand in the U.S. market — both from mainstream consumers and from the Bangladeshi diaspora. He decides to invest in expanded jute production in Bangladesh, noting that the Bangladeshi government has opened the sector to foreign investment. His experience as an investor tells him this kind of opportunity should not be missed.

8. Investment in Gold

Gold is one of the oldest forms of investment in human history — and it remains highly relevant today. Gold has universal value, is accepted everywhere, and has a buyer in virtually every market across the world regardless of economic conditions. It is widely considered one of the safest long-term stores of value, particularly during times of inflation, economic uncertainty, or currency instability.

When paper currencies lose value, gold typically holds or increases its value. This makes it an important diversification tool for any investor's portfolio — a safe haven when other assets are performing poorly.

Example: Rajib hears that gold prices have dropped slightly. He takes the opportunity to buy some gold jewelry and ornaments. He is confident that gold prices will recover and exceed the current level at some future point — giving him the option to sell at a profit or simply keep the gold as a reliable store of value for personal use. For him, it is one of the most straightforward and dependable investments available.

Before putting your money into any investment, three questions should always guide your decision.

The first is risk — how much risk does this investment carry, and are you comfortable with that level of uncertainty? Every investment carries some degree of risk. Anyone who tells you otherwise is not being honest with you.

The second is time horizon — how long are you prepared to keep your money invested? Generally speaking, longer time horizons allow you to take on more risk and ride out short-term volatility, while shorter time horizons call for more conservative, liquid investments.

The third is return — what return do you realistically expect, and does it justify the risk and the time commitment? Always be honest with yourself here. Unrealistically high return expectations are one of the most common reasons investors make poor decisions.

Investment is not something reserved for wealthy people or financial professionals. It is a practice that anyone with savings can — and should — engage in, at whatever level suits their situation.

The most important thing is to start with knowledge. Understand what you are investing in. Understand the risk. Understand the time commitment. And understand that patience is one of the most powerful tools any investor has — as Warren Buffett has demonstrated more convincingly than perhaps anyone in history.

In Bangladesh, the investment landscape is growing rapidly — from the Dhaka Stock Exchange to real estate markets, from government bonds to the growing mutual fund industry. The options available to ordinary investors are expanding every year. The question is not whether you should invest — it is where to start and how to do it wisely.