Capital Investment

Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income, or appreciation of the value of the instrument. 1 It is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance no matter for households, firms, or governments. An investment involves the choice by an individual or an organization such as a pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives e.g. futures or options , or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time.

Investment comes with the risk of the loss of the principal sum. The investment that has not been thoroughly analyzed can be highly risky with respect to the investment owner because the possibility of losing money is not within the owner's control. The difference between speculation and investment can be subtle. It depends on the investment owner's mind whether the purpose is for lending the resource to someone else for economic purpose or not.

In the case of investment, rather than store the good produced or its money equivalent, the investor chooses to use that good either to create a durable consumer or producer good, or to lend the original saved good to another in exchange for either interest or a share of the profits. In the first case, the individual creates durable consumer goods, hoping the services from the good will make his life better. In the second, the individual becomes an entrepreneur using the resource to produce goods and services for others in the hope of a profitable sale. The third case describes a lender, and the fourth describes an investor in a share of the business. In each case, the consumer obtains a durable asset or investment, and accounts for that asset by recording an equivalent liability. As time passes, and both prices and interest rates change, the value of the asset and liability also change.

An asset is usually purchased, or equivalently a deposit is made in a bank, in hopes of getting a future return or interest from it. The word originates in the Latin "vestis", meaning garment, and refers to the act of putting things money or other claims to resources into others' pockets. 4 . The basic meaning of the term being an asset held to have some recurring or capital gains. It is an asset that is expected to give returns without any work on the asset per se. The term "investment" is used differently in economics and in finance. Economists refer to a real investment such as a machine or a house , while financial economists refer to a financial asset, such as money that is put into a bank or the market, which may then be used to buy a real asset.

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. Examples include railroad or factory construction. Investment in human capital includes costs of additional schooling or on-the-job training. Inventory investment refers to 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.