Definition of Investment

There are many definitions available on the word ‘investment’. Here are some, received from famous dictionaries, for your knowledge. True understanding of this will lead you to take proper actions to get long term success with your investments.

A commitment of dollars for a period of time with the expectation or hope of receiving future payments that will cover any inflation and compensate the investor for the time that the funds are committed and the uncertainty of any future return. An investment may be made by any person or entity, including corporations, pension funds, or a government, and be made in land, equipment, stocks, bonds, commodities, or any other financial instrument. says:

An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

Investopedia Says:

The building of a factory used to produce goods and the investment one makes by going to college or university are both examples of investments in the economic sense.

In the financial sense investments include the purchase of bonds, stocks or real estate property.

Be sure not to get ‘making an investment’ and ‘speculating’ confused. Investing usually involves the creation of wealth whereas speculating is often a zero-sum game; wealth is not created. Although speculators are often making informed decisions, speculation cannot usually be categorized as traditional investing.

Another definitions

Definition 1

In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means the use money in the hope of making more money.

Definition 2

In business, the purchase by a producer of a physical good, such as durable equipment or inventory, in the hope of improving future business.

Definition 3

Trade off between risk and reward while aiming for incremental gain and preservation of the invested amount (principal). In contrast, speculation aims at ‘high gain or heavy loss,’ and gambling at ‘out of proportion gain or total loss.’ Two main classes of investment are (1) Fixed income investment such as bonds, fixed deposits, preference shares, and (2) Variable income investment such as business ownership (equities), property ownership. , investment means creation of capital or goods capable of producing other goods or services. Expenditure on education and health is recognized as an investment in human capital, and research and development in intellectual capital. Return on investment (ROI) is a key measure of a firm’s performance.