The word "investment" can be defined in many ways according to different theories and principles. It is a term that can be used in a number of contexts. However, the different meanings of "investment" are more alike than dissimilar. Generally, investment is the application of money for earning more money. Investment also means savings or savings made through delayed consumption. According to economics, investment is the utilization of resources in order to increase income or production output in the future.
An amount deposited into a bank or machinery that is purchased in anticipation of earning income in the long run is both examples of investments. Although there is a general broad definition to the term investment, it carries slightly different meanings to different industrial sectors.
According to economists, investment refers to any physical or tangible asset, for example, a building or machinery and equipment. On the other hand, finance professionals define an investment as money utilized for buying financial assets, for example stocks, bonds, bullion, real properties, and precious items.
According to finance, the practice of investment refers to the buying of a financial product or any valued item with anticipation that positive returns will be received in the future. The most important feature of financial investments is that they carry high market liquidity. The method used for evaluating the value of a financial investment is known as valuation. According to business theories, investment is that activity in which a manufacturer buys a physical asset, for example, stock or production equipment, in expectation that this will help the business to prosper in the long run.
Types of investments
Investments may be classified as financial investments or economic investments.In Finance investment is putting money into something with the expectation of gain that upon thorough analysis has a high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling. Investment is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments.
Economic investments are undertaken with an expectation of increasing the current economy’s capital stock that consists of goods and services. Capital stock is used in the production of other goods and services desired by the society. Investment in this sense implies the expectation of formation of new and productive capital in the form of new constructions, plant and machinery, inventories, and so on. Such investments generate physical assets and also industrial activity. These activities are undertaken by corporate entities that participate in the capital market.
Financial investments and economic investments are, however, related and dependent. The money invested in financial investments is ultimately converted into physical assets. Thus, all investments result in the acquisition of some asset, either financial or physical. In this sense, markets are also closely related to each other. Hence, the perfect financial market should reflect the progress pattern of the real market since, in reality, financial markets exist only as a support to the real market.
Characteristics of investment
The features of economic and financial investments can be summarized as return, risk, safety, and liquidity.
Return = Capital Gain + Yield (interest, dividend etc.)
Risk refers to the loss of principal amount of an investment. It is one of the major characteristics of an investment.
The risk depends on the following factors:
Safety refers to the protection of investor principal amount and expected rate of return.
Liquidity refers to an investment ready to convert into cash position. In other words, it is available immediately in cash form. Liquidity means that investment is easily realizable, saleable or marketable. When the liquidity is high, then the return may be low. For example, UTI units. An investor generally prefers liquidity for his investments, safety of funds through a minimum risk and maximization of return from an investment.
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Security Analysis And Investment Management Tutorial
Introduction To Security Analysis
Risk And Return Concepts
New Issue Market (nim)
Stock Exchanges In India – Operations
Listing Of Securities
Stock Brokers And Other Intermediaries
Stock Market Indices
Valuation Of Fixed Income Securities Or Valuation Of Bonds
Valuation Of Variable Income Securities Or Equity Share Valuation
Fundamental Analysis: I
Fundamental Analysis: Ii
Efficient Market Theory
Securities And Exchange Board Of India And Stock Market Regulation
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