| In economics or macroeconomics | |||||||||||||||||||||||||||||||||||||
| 2>
In economic theory or in macroeconomics, investment is the amount purchased per unit time of goods which are not consumed but are to be used for future production (ie. capital). Examples include railroad or factory construction. Investment in human capital includes costs of additional schooling or on-the-job training. Inventory investment is the accumulation of goods inventories; it can be positive or negative, and it can be intended or unintended. In measures of national income and output, "gross investment" (represented by the variable I) is also a component of gross domestic product (GDP), given in the formula GDP = C + I + G + NX, where C is consumption, G is government spending, and NX is net exports. Thus investment is everything that remains of total expenditure after consumption, government spending, and net exports are subtracted (i.e. I = GDP − C − G − NX).
Non-residential fixed investment (such as new factories) and residential investment (new houses) combine with inventory investment to make up I. "Net investment" deducts depreciation from gross investment. Net fixed investment is the value of the net increase in the capital stock per year.
Fixed investment, as expenditure over a period of time ("per year"), is not capital. The time dimension of investment makes it a flow. By contrast, capital is a stock— that is, accumulated net investment to a point in time (such as December 31).
Investment is often modeled as a function of Income and Interest rates, given by the relation I = f(Y, r). An increase in income encourages higher investment, whereas a higher interest rate may discourage investment as it becomes more costly 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 lending out that amount of money for interest.[2]
[edit] Tags:Consumption,Edit,Economic Theory,Macroeconomics,Goods,Capital,Railroad,Factory,Human Capital,Inventory Investment,Inventories,Measures Of National Income And Output,Variable,Gross Domestic Product,Depreciation,Flow,Investment, | |||||||||||||||||||||||||||||||||||||
| In finance | 2>
In finance, investment is the commitment of funds through collateralized lending, or making a deposit into a secured institution.
In contrast to investment; dollar cost averaging, market timing, and diversification are phrases associated with speculation.
Investments are often made indirectly through intermediaries, such as banks, credit unions, brokers, lenders, and insurance companies. Though their legal and procedural details differ, an intermediary generally makes an investment using money from many individuals, each of whom receives a claim on the intermediary.
[edit] | Tags:Speculation,Finance,Collateral,Market Timing,Intermediaries,Banks,Credit Unions,Brokers,Lenders,Insurance, History | 2>
The Code of Hammurabi 1700 B.C. provided a legal framework for investment establishing a means for the pledge of collateral by codifying debtor and creditor rights in regard to pledged land. Punishments for breaking financial obligations were not as severe as those for crimes involving injury or death.
In the early 1900s purchasers of stocks, bonds, and other securities were described in media, academia, and commerce as speculators. By the 1950s the term investment had been co-opted by financial brokers and their advertising agencies to promote speculation.
[edit] | Tags:Code Of Hammurabi, Linguistic significance | 2>
Common usage of "investment" to describe "speculation" has reduced investor capacity to discern investment from speculation, reduced investor awareness of risk associated with speculation, increased capital available to speculation, and decreased capital available to investment.
[edit] | Tags:Risk, Real estate as the instrument of investment | 2>
In real estate, investment money is used to purchase property for the purpose of holding, reselling or leasing for income and there is an element of capital risk.
[edit] | Tags:Real Estate,Property, Residential real estate | 3>
Investment in residential real estate is the most common form of real estate investment measured by number of participants because it includes property purchased as a primary residence. In many cases the buyer does not have the full purchase price for a property and must engage a lender such as a bank, finance company or private lender. Different countries have their individual normal lending levels, but usually they will fall into the range of 70–90% of the purchase price. Against other types of real estate, residential real estate is the least risky.[citation needed]
[edit] | Tags: Commercial real estate | 3>
Commercial real estate consists of multifamily apartments, office buildings, retail space, hotels and motels, warehouses, and other commercial properties. Due to the higher risk of commercial real estate, loan-to-value ratios allowed by banks and other lenders are lower and often fall in the range of 50–70%.[citation needed]
[edit] | Tags:Loan-to-value Ratios, See also | 2>
Asset
Risk
Alternative investments
Diversifying investment
Foreign direct investment
List of countries by gross fixed investment as percentage of GDP
List of economics topics
Mortgage Investment Corporation
Rate of return (ROR, a.k.a. ROI)
Socially responsible investing
Specialized investment fund
[edit] | Tags:Asset,Alternative Investments,Diversifying Investment,Foreign Direct Investment,List Of Countries By Gross Fixed Investment As Percentage Of Gdp,List Of Economics Topics,Mortgage Investment Corporation,Rate Of Return,Specialized Investment Fund, Notes | 2>
^ Graham, Benjamin and David Dodd (1951). Security Analysis. McGraw–Hill Book Company. ISBN 007144829.
^ Kevin A. Hassett (2008, 2nd ed.). "Investment," The Concise Encyclopedia of Economics. Library of Economics and Liberty.
[edit] | Tags: External links | 2>
Investing at the Open Directory Project
Retrieved from "http://en.wikipedia.org/w/index.php?title=Investment&oldid=492753494"
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