'Investment' is the commitment of money or capital to purchase financial
instruments or other assets in order to gain profitable returns in form of
interest, income, or appreciation of the value of the instrument. [{{cite
book
| last = Sullivan first = arthur authorlink = Arthur O' Sullivan coauthors =
| Steven M. Sheffrin title = Economics: Principles in action publisher =
| Pearson Prentice Hall date = 2003 location = Upper Saddle River, New Jersey
| 07458 pages = 271 url = http://www.pearsonschool.com/index.cfm?locator=PSZ3-
| R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&-
| level=4 doi = id = isbn = 0-13-063085-3}}] It is related to saving or
| deferring consumption. Investment is involved in many areas of the economy,
| such as business management and finance no matter for households, firms, or
| governments. An investment involves the choice by an individual or an
| organization such as a pension fund, after some analysis or thought, to
| place or lend money in a vehicle, instrument or asset, such as property,
| commodity, stock, bond, financial derivatives (e.g. futures or options), or
| the foreign asset denominated in foreign currency, that has certain level of
| risk and provides the possibility of generating returns over a period of
| time.[Graham, Benjamin, and David Dodd (1951). Security Analysis. McGraw-
| Hill Book Company. ISBN 0071448209] Investment comes with the risk of the loss of the . The investment that has not
been thoroughly analyzed can be highly risky with respect to the investment
owner because the possibility of losing money is not within the owner's control.
The difference between speculation and investment can be subtle. It depends on
the investment owner's mind whether the purpose is for lending the resource to
someone else for economic purpose or not.[Graham and Dodd (1951). Security
Analysis. McGraw-Hill Book Company. ISBN 0071448209] In the case of investment, rather than store the good produced or its money
equivalent, the investor chooses to use that good either to create a durable
consumer or producer good, or to lend the original saved good to another in
exchange for either interest or a share of the profits. In the first case, the
individual creates durable consumer goods, hoping the services from the good
will make his life better. In the second, the individual becomes an entrepreneur
using the resource to produce goods and services for others in the hope of a
profitable sale. The third case describes a lender, and the fourth describes an
investor in a share of the business. In each case, the consumer obtains a
durable asset or investment, and accounts for that asset by recording an
equivalent liability. As time passes, and both prices and interest rates change,
the value of the asset and liability also change. An asset is usually purchased, or equivalently a deposit is made in a bank, in
hopes of getting a future return or interest from it. The word originates in the
Latin "vestis", meaning garment, and refers to the act of putting things (money
or other claims to resources) into others'
pockets.[[http://www.etymonline.com/index.php?search=invest&searchmode=none
Invest] on etymonline.com]. The basic meaning of the term being an asset
held to have some recurring or capital gains. It is an asset that is expected to
give returns without any work on the asset per se. The term "investment" is used
differently in economics and in finance. Economists refer to a real investment
(such as a machine or a house), while financial economists refer to a financial
asset, such as money that is put into a bank or the market, which may then be
used to buy a real asset.
|