Investment

Published Jan 5, 2023

Definition of Investment

Investment is defined as the act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit. That means it is the process of putting money into a project or asset with the expectation of making a return on that investment.

Example

To illustrate this, let’s say you have USD 10,000 that you want to invest. You could put that money into a savings account, which would earn you a small amount of interest. Alternatively, you could invest it in an investment fund or individual stocks, which could potentially yield a much higher return (i.e., historically, up to 8% per year). Or you could invest in a business venture, such as starting your own restaurant. In this case, you would be investing your money in the hope of making a profit from the restaurant. While this is most likely the riskiest choice, it is also the one with the highest potential profit.

Why Investment Matters

Investment is an important part of the economy, as it helps to create jobs, stimulate economic growth, and increase the wealth of individuals and businesses. By investing in businesses, individuals can help to create new products and services, which can lead to increased productivity and economic growth.

Furthermore, investments can also help to diversify an individual’s portfolio, which can help to reduce risk and increase returns. And finally, investments can also help to create wealth, as they can generate returns that can be used to purchase assets or to fund retirement.