Investment

From Freepedia

Invest redirects here. For other uses, see Invest (disambiguation).

Contents 1 Definition 2 Types of investment 3 See also 4 Notes 5 External links

Definition

Investment or investing¹ is a term with several closely-related meanings in finance and economics. It refers to the accumulation of some kind of asset in hopes of getting a future return from it.

Types of investment

• In theoretical economics, investment means the purchase (and thus the production) of capital goods - goods which are not consumed but instead used in future production. Examples include building a railroad, or a factory, clearing land, or putting oneself through college. In a stricter sense, investment is also a component of GDP given in the formula GDP = C + I + G + NX. The investment function in that aspect is divided into non-residential investment (such as factories, machinery etc) and residental investment (new houses). Investment is a function of income and interest rates, given by the relation I = (Y, i). An increase in income will encourage higher investment, whereas a higher interest rate will discourage investment as it becomes costlier to borrow money. Even if a firm chooses to use its own funds in an investment, the interest rate represents an opportunity cost of investing those funds rather than loaning them out for interest.

• In finance, investment means buying securities or other monetary or paper assets. Valuation is the method for assessing whether a potential investment is worth its price. Types of investments include equity investment or real estate investment, foreign currencies or bonds or postage stamps. These investments may then provide future cash flows and may increase or decrease in value.

• Investment clubs are groups of individuals who meet on a regular basis for the purpose of investing money, most often in stocks and other publicly-traded securities. Various online communities devoted to this type of investing have recently emerged and have contributed to the personal investing boom in the United States. Two of the largest provide best practices for investment clubs and extensive accounting resources for these groups of investors. The latter site also has an extensive listing of U.S.-based investment clubs. A smaller international community founded in 1997 openly allows individual investors to observe and learn from its activities.

See also

• Appreciation
• Capital accumulation
• Divestment
• Financial economics
• Foreign Direct Investment
• Gold as an investment
• Investor profile
• Investor relations
• Over-investing
• Philatelic investment
• Regulation FD
• Return on investment
• Saving (economics)
• Speculation
• Trend
• Socially responsible investing
• Ethical investing
• National association of investors corporation

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Notes

Note 1: UK and U.S. English, respectively.

External links

• Investing textbook - in Wikibooks
• Financial Times
• Wall Street Journal
• Yahoo! Finance