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Over the past few days I’ve seen the word “investment” inappropriately applied to so many things that I’ve had to write this post to vent off my frustration.

Webster defines “investment” as “the outlay of money usually for income or profit”

Given this definition we can conclude that CARS are NOT investments UNLESS you are a car dealer, a taxi driver or are going to generate income somehow off of the car you just purchased.  If you are generating income off of a vehicle then you are likely taking depreciation on it as well – this is a big clue as to whether or not it was an “investment.”

Please try to refrain from writing about how buying a new car was a great or bad “investment” because a car is no such thing unless it is generating income or profit.

We can also conclude that PETS are NOT investments UNLESS you are a breeder or a pet shop owner and plan on breeding/(re)selling animals.

Real Estate is generally not an “investment” if it is your primary residence and you’re not renting out rooms or purchasing the property for the specific purpose of generating income or profit.   A big clue here is the depreciation factor for your real estate; if you’re not taking depreciation on it then it’s probably not an “investment.”

Stocks are investments because they will likely generate income (dividends) or profit (appreciation).  Bonds are investments as they will generate cash flow (interest) and potentially profit (appreciation).  Real Estate can be investment if you’re generating income (rent) or you’re a home builder and will earn a profit from sale after costs factored.

You’ll find that www.webster.com can be a very useful resource.