Legal Definitions - invest

To invest, in a legal and financial context, means to commit money or capital with the primary expectation of generating a financial return, such as income or profit. The goal is for the initial outlay to grow in value or to produce ongoing revenue. This action is distinct from simply giving money as a gift, where no return is expected, or providing a loan, which typically involves a promise of repayment, often with interest.

• Example 1: Funding a Startup

  A venture capital firm provides $5 million to a promising technology startup in exchange for an ownership stake in the company. The firm is not giving a gift or a loan; instead, it is investing with the expectation that the startup will grow significantly, increasing the value of its ownership stake and eventually yielding a substantial profit when the company is sold or goes public.

• Example 2: Purchasing Rental Property

  An individual uses their savings to purchase a duplex apartment building. Their intention is to rent out both units to tenants. This is an investment because the individual expects to generate regular rental income (profit) from the property, and potentially benefit from the property's appreciation in value over time, rather than simply using the money for personal consumption or giving it away.

• Example 3: Contributing to a Retirement Account

  An employee regularly contributes a portion of their paycheck to a 401(k) retirement plan, which then allocates the funds into various mutual funds. This is an act of investing because the employee is committing money with the long-term goal of growing their retirement savings through the returns generated by the mutual funds, ensuring financial security in the future.