Definition of investment



Contents

  • 1 Definition of investment
  • 2 investment objectives
  • 3 investment tools
  • 4 types of investment
    • 4.1 According to its type
    • 4.2 According to his tool
    • 4.3 According to the criterion of multiplicity or not
    • 4.4 According to the property standard
  • 5 References

Definition of investment

Investment (English: Investment) is the capital used in the production or provision of services or commodities, and it may be a fixed investment such as preferred stocks and bonds, or a changing investment such as property ownership, [1] and investment is defined as the assets that individuals and firms buy in order to obtain Income now or in the future. [2]

Another definition of investment is a sum of money that is invested in something, especially in businesses that include the purchase of new machinery and stocks. [3]

Investment goals

The investment seeks to achieve a set of goals, namely: [4]
  • Providing protection for money from the low purchasing power resulting from inflation , as the investment goal depends on achieving capital gains and returns that maintain the purchasing power of the invested money.
  • Maintaining the continuity of development in the financial wealth, so the aim of the investment is to achieve acceptable financial returns, in conjunction with an increase in the value of the capital.
  • Reaching the largest value of current income, which is the focus of investors on the investments that achieve the greatest financial returns without paying attention to any other considerations, such as the risk ratio.
  • Providing protection for income from taxes , as the investment seeks to benefit the investors from the tax benefits arising from the applicable legislations, and if the investment is made in an inappropriate field, this may lead to exposure to a high percentage of taxes.
  • Reaching the largest growth of wealth , and is concerned with achieving this goal of speculative investment in the financial market , where they are keen to choose high-risk investments, and they accept all the consequences of their choices.
  • Securing the future, which is the investment associated with individuals who have reached the age of retirement. The purpose of the investment here is to secure the future by investing money in purchasing securities that offer medium returns, with the least degree of risk.

Investment tools

The investment depends on a set of its tools, and they constitute financial or real assets that belong to the ownership of the investors. These tools are investment media that are classified into two parts: [5]
  • Financial investment tools, which include the following:
    • Economic projects: It is one of the most common types of material investment tools, and it witnesses a diversification in its commercial, service, agricultural, and industrial activities, and it seeks to produce services and goods that constitute the needs of individuals.
    • Real estate : investments are based on two methods:
      • Direct investment: It is the investor's purchase of a real property, such as land and buildings.
      • Indirect investment: It is the investor’s purchase of a real estate bond, through participation in one of the investment portfolios or real estate expenses.
    • Commodities: These are products that have investment properties and have their own markets that are similar to stock exchanges. Examples of these commodities are gold and coffee.
  • Financial investment tools, which include the following:
    • Shares : are the financial documents that are delivered to individuals who own shares of the capital of a particular company . These shares are divided into two types:
      • Ordinary shares: They are property documents that possess market, book, and nominal values; the nominal value is the value recorded on the stock bond, and the book value is the value of the equity of the stock and does not include the preferred shares, but profits and reserves, while the market value constitutes the selling price of the stock In the capitalist market.
      • Preferred shares: are shares that give their owners rights of their own, such as priority in achieving profits, and increasing the value of profit as a result of liquidating the company . These shares have three values ​​such as common shares, namely: book values, market and nominal.
    • Bonds: are documents that prove their owners have certain rights to own property or use specific services. They are also debts arising from natural or legal persons. Bonds include the following types:
      • Government bonds, known as government bonds, are sukuk with long and medium term debts, which are issued by governments to obtain resources to help them face inflation or cover the economic deficit.
      • Bonds issued by institutions: These are contracts between the establishments (borrowers) and investors (lenders), and according to this agreement the second party lends a sum of money to the first party who pledges to return it with the value of the interest it entails on a specific date.

Types of investment

There are a group of types of investment that are classified according to several specific criteria. Below is information on the most important of these types: [5]

According to its type

  • Economic investment: It is the production of services or goods intended for investment or consumption, such as agricultural and industrial projects.
  • Social investment: is the endeavor to raise the social welfare of individuals, such as cultural and sports projects.
  • Administrative investment: is the development of administrative places that are concerned with preserving society , such as military and government buildings.
  • Investing human resources : It is the pursuit of human development that appears in the training and educational programs provided to individuals in the state.

According to his tool

The following types include:
  • Real investment: Also known as business or enterprise investment, investment is considered real when the investor is given rights to obtain real assets, such as gold and real estate.
  • Financial investment: is the purchase of a share in the capital or loan that provides its owner with profits or interest guaranteed by law .
  • Moral investment: It is an investment based on obtaining knowledge or intellectual assets, such as carrying out scientific research.

According to the criterion of multiplicity and lack thereof

  • Multiple investment: Also known as portfolio investment, it is investment in more than one type of financial or material investment vehicle.
  • Non-recycled investment: is the participation in one investment, such as buying only one financial or physical asset.

According to the property standard

This means that the investment belongs to individuals, groups or countries, and includes the following types:
  • Private investment: It is an investment that is legally executed by an individual or a group of individuals within a private company.
  • Public investment: It is an investment executed by a state-owned establishment or group of establishments within a public company .
  • Mixed investment: It is an investment executed by a person or group of people, or an establishment or a group of private establishments, with a public establishment or group of establishments, within any type of mixed establishments whose ownership is distributed between two public and private parties.

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