Meaning of Investment
Investment is a process that is engaged in by people who have savings, i.e. investments are attained from savings, or in other words, savings are invested by people. But all people who are savers are not the capitalist. Investment is an activity different from saving. Let us see the meaning of investment.
It may imply many things to many persons. If one person has given some money to another, he may look at his loan as an investment. He anticipates to get back the money, at a future date, along with interest. Another person may have bought one kilogram of gold for the purpose of price appreciation which can be considered as an investment. Yet another person may buy an insurance plan for the several profits in future which is investment for him.
In all these cases it can be observed that investment requires employment of funds with the goal of achieving additional extra income or growth. The necessary quality of an investment is that it involves waiting for a reward. Investment involves the dedication of resources which have been preserved in the hope that some profits with accrue in future
Thus, investment may be outlined as "a commitment of funds made in the anticipation of some positive rate of return".
Financial and Economic Meaning of Investment
From the financial point of view, investment is the commitment of a person's finances to derive future income in the form of dividend interest, premiums, pension benefits or admiration in the value of their capital. Buying of debentures, shares, insurance policies, post office savings certificates are all investments which generate financial assets.
From the economic point of view, investment means the net additions to the economy's capital stock which comprises of goods and services that are employed in the production of other goods and services. Investment in this sense involves the information of new and productive capital in the form of inventories, new constructions, plant and machinery, etc. which generate physical assets.
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