What's what in finances: Investment What's what in finances: Investment

What's what in finances: Investment

Investment is the act of placing capital into a project or business with the intent of making a profit on the initial placing of capital. An investment may involve the extension of a loan or line of credit, which entitles one to repayment with interest, or it may involve buying an ownership stake in a business, with the hope that the business will become profitable. Investing may also involve buying a particular asset with the intent to resell it later for a higher price. Many types of investing exist, and each is subject to greater or lesser regulation in the jurisdiction in which it takes place. Legally, investing requires the existence and protection of individual property rights. Investing wisely requires a combination of astuteness, knowledge of the market, and timing.

Investment can be split up into gross and net:

Gross investment is the total amount of investment that is undertaken in an economy over a specified period (usually one year).

Net investment is gross investment, less replacement investment or capital consumption. It's necessary to replace that part of the economy's existing capital stock that is used up in producing this year's output.

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