Investment has different meanings in finance and economics. In finance, investment is putting money into something with the expectation of gain, usually over a longer term. This may or may not be backed by research and analysis. Most or all forms of investment involve some form of risk, such as investment in equities, property, and even fixed interest securities which are subject, inter alia, to inflation risk. In contrast putting money into something with a hope of short-term gain, with or without thorough analysis, is gambling or speculation. This category would include most forms of derivatives, which incorporate a risk element without being long-term homes for money, and betting on horses. It would also include purchase of e.g. a company share in the hope of a short-term gain without any intention of holding it for the long term. Under the efficient market hypothesis, all investments with equal risk should have the same expected rate of return: that is to say there is a trade-off between risk and expected return. But that does not prevent one from investing in risky assets over the long term in the hope of benefiting from this trade-off.
In economics, investment is related to saving and deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments.
Famous quotes containing the word investment:
“The only thing that was dispensed free to the old New Bedford whalemen was a Bible. A well-known owner of one of that citys whaling fleets once described the Bible as the best cheap investment a shipowner could make.”
—For the State of Massachusetts, U.S. public relief program (1935-1943)
“There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact.”
—Mark Twain [Samuel Langhorne Clemens] (18351910)