Final answer:
A good investment may either grow in value or produce income, with factors like risk, rate of return, and liquidity varying between assets like tangible goods and stocks. Wise investment requires balancing these factors with personal objectives.
Step-by-step explanation:
A good investment typically has the potential to do one or both of the following two things: grow in value or produce income. When you invest in tangible assets like houses, the rate of return can be moderate but the risk varies. For example, the risk associated with housing is moderate, while it is higher when investing in commodities like gold or collectibles such as baseball cards. Additionally, the liquidity is generally low for tangible assets, as selling items like real estate or art can take a significant amount of time and effort.
When it comes to investing in stocks, the scenario changes significantly. Stocks can offer a high rate of return over time but also come with higher risks, particularly in the short term. However, they tend to provide high liquidity, as shares in publicly traded companies can usually be sold quickly for cash.
It's important for investors to consider their investment objectives and to understand the balance between risk and return, as well as the liquidity of their investments. Wise investment decisions take into account not only the potential for growth or income but also the investor's time horizon and risk tolerance.