Meaning of Investment

The Best Way To Understand The Meaning Of Investment

by Shruti Agarwal on Basic Finance, Investing Basics

The meaning of Investment is spending your time or energy on something anticipating income generation or value addition in future. 

For example: A farmer ploughs his field on a daily basis under the expectation that he may reap some returns in the form of grains after a specified period of time.  This means that he gives his time and energy anticipating future benefits within a certain time frame.

Once you have read the aforesaid example, now you already know what an investment means, let us understand the term investment in terms of finance:

In finance, the meaning of investment is purchasing or creating an asset anticipating an interest income, rental income, dividend, profits or any combination of the mentioned returns. For example: I purchased 100 shares of a company anticipating dividend from these shares. In this case, shares are my investment and I am anticipating dividend income from the investment made.

Meaning of Investment

Investment is made in anticipation of future benefits which may not be guaranteed. The reason for this instability is the element of risk associated with the investment made.  Whether the investment is made in real estate, capital market or any other kind of securities, the risk involved is indispensable. Before making any investment commitment, it is wise enough to consult an expert or do a dedicated research to assure ourselves of taking the best possible investment decision.

Happy Learning!

 


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