Define Investment

Introduction

Investment is the employment of funds on assets with the aim of earning income or capital appreciation Investment has two attributes namely time and risk. Present consumption is sacrificed to get a return in the future. The sacrifice that has to be borne is certain but the return in the future may be uncertain. This attribute of investment indicates the risk factor. The risk is undertaken with a view to reap some return from the investment. Foaymavestmeneanomonetary cotment. A person’s cotmeno buy a flat or a house for his personal use may be an investment from his point of view. This cannot be considered as an actual investment as it involves sacrifice but does not yield any financial return.

To the economisinvestment is thaddition made to the nation’s capital stock that consists of goods and services that are used in the production process. A net addition to the capital stock means an increase in the buildings, equipments or inventories. These capital stocks are used to produce other goods and services.

Financial investment is the allocation of money of assets that are expected to yield some gain over a period of time. It is an exchange of financial claims such as stocks and bonds for money. They are expected to yield returns and experience capital growth over the years.

The financial and economic meanings are related to each other because the savings of the individual flow into the capital market as financial investments, to be used in economic investment. Even though they are related to each other, we are concerned only about the financial investment made on securities.

Thuvestmenainea cotmenundade in thectation oomtive rateturn”xpectatioeturn essentiaenf investment.

Since the return is expected to be realized in future, there is a possibility that the return actually realized is lower than the return expected to be realized. This possibility of variation in the actual return is known as investment risk. Thus, every investment involves return and risk.