What is investment?

The word Investment refers to either the application of money to make more money, the purchase of goods that are not consumed now but are used in the future to make money (create wealth), or a monetary asset that will rise in value and be sold at a higher price or provide income in the future.

According to the Financial Times, there are two main types of investments:

  • Direct Investment: putting your money into specific fixed assets such as buildings, factories, property, etc.
  • Indirect Investment: purchasing securities or other assets that are bought and sold on financial markets.
Warren Buffet on investing
American business magnate, investor and philanthropist Warren Buffett said “Investing is putting out money to be sure of getting more money back later at an appropriate rate.”

In economics, investment refers to the usage of resources in order to raise income or output in the future. If you deposit money in an interest-bearing account in a bank, or purchase machinery in anticipation of earning income from its production, you are investing.

Difference between asset and investment

If you buy a house and live in it, it is an asset. Assets can go up and down in value. Even if you do not live in it, and leave it empty, it is an asset.

However, if you decide to rent out your house, i.e. use it to generate income, that asset becomes an investment. An investment is something that generates further income.

Investment may also involve giving up time for future benefit. For example, somebody who goes to university is investing his or her time in order to gain a qualification and have a career in the future.

Many individuals get together and create investment clubs, which pool their resources and knowledge together with the aim of achieving more successful investment outcomes.

Cambridge Dictionaries Online says investment is:

“The ​act of putting ​money, ​effort, ​time, etc. into something to make a ​profit or get an ​advantage, or the ​money, ​effort, ​time, etc. used to do this.”

In military terminology, investment can mean the process of surrounding a town or fort with armed forces to prevent anything or anybody from entering or escaping (a military blockade). The aim is to cut communications with the outside world, and prevent reinforcements and supplies from entering.

Three images related to investment plus a definition of investment.
Image created by Market Business News.

Compound phrases with ‘investment’

A compound phrase is a term that consists of two or more words, such as ‘investment adviser.’ In the English language, there are many compound phrases containing the word ‘investment.’ Let’s have a look at some of them:

  • Investment strategy

The plan for allocating assets to meet financial goals.

For example: “Her ‘investment strategy’ focuses on long-term growth and diversification.”

  • Investment portfolio

A collection of various investment assets.

For example: “He regularly reviews his ‘investment portfolio’ to adjust for market changes.”

  • Investment advisor

A professional who provides financial guidance on investments.

For example: “She consulted an ‘investment advisor’ to optimize her retirement savings.”

  • Investment risk

The potential for losing money in an investment.

For example: “Understanding ‘investment risk’ is crucial before making any financial decisions.”

  • Investment fund

A pool of money collected from many investors to invest in securities. For example: “He diversified his assets by investing in an international ‘investment fund’.”

  • Investment return

The profit or loss derived from investing.

For example: “They were pleased with the high ‘investment return’ from their stock picks.”

  • Investment opportunity

A potential financial venture that could yield profit.

For example: “The start-up presented an exciting ‘investment opportunity’ for the venture capitalists.”

Etymology of ‘Investment’

Etymology studies the origin of words and how their meanings evolved over time.

According to etymonline.com, the term ‘investment’ emerged in English around the 1590s, initially meaning ‘act of putting on vestments’ and ‘surrounding and besieging’ a military target.

By around 1610, it began to be used in the financial sense of ‘investing money or capital,’ reflecting its current usage.

Translation

The English word ‘investment’ is ‘investissement’ in French, Spanish – inversión, Portuguese – investimento, Italian – investimento, German – Investition, Russian – инвестиции, Japanese – 投資, and Chinese – 投资.

Investment quotes

Here is a short list of inspiring quotes. You can find an extended list of investment quotes here.

  • British economist, John Maynard Keynes (1883-1946), said:

“The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future.”

  • Apple Inc. co-founder, Steve Jobs (1955-2011), said:

“The over-all point is that new technology will not necessarily replace old technology, but it will date it. By definition. Eventually, it will replace it. But it’s like people who had black-and-white TVs when color came out. They eventually decided whether or not the new technology was worth the investment.”

  • American engineer and former astronaut, Buzz Aldrin, the second man to walk on the moon, said:

“There’s a need for accepting responsibility – for a person’s life and making choices that are not just ones for immediate short-term comfort. You need to make an investment, and the investment is in health and education.”

  • Mexican business magnate Carlos Slim, the world’s richest person from 2011-2013, said:

“Anyone who is not investing now is missing a tremendous opportunity.”

  • America’s 35th President, John F. Kennedy (1917-1963), said:

“The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital… the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.”

  • Hungarian-born American business magnate, George Soros, said:

“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”

  • One of the Founding Fathers of the United States, Benjamin Franklin (1706-1790), said:

“An investment in knowledge pays the best interest.”

  • American business magnate, Bill Gates, co-founder of Microsoft Corporation, said:

“I believe the returns on investment in the poor are just as exciting as successes achieved in the business arena, and they are even more meaningful!”

Video – What is an investment?

This educational video, from our sister channel on YouTube – Marketing Business Network, explains what the term ‘Investment’ means using simple and easy-to-understand language and examples.