Investing allows your money to work for you by earning additional income or profit over time. Common investment tools include stocks, bonds, mutual funds, and real estate, each with different potential returns and risks. Diversifying investments across multiple tools can reduce overall risk. The purpose of investing is to achieve financial goals like retirement, which are easier to reach the earlier one starts and by taking advantage of compound returns. Taxes are owed on most investment earnings so it is important to consider taxation when investing.