There are two concepts of investment:
(1) Economic Investment: The concept of economic investment means additions to the capital stock of the society. The capital stock of society is the goods which are used in the production of other goods. The term investment implies the formation of new and productive capital in the form of new construction and producers durable instrument such as Plant & Machinery, Inventories and human capital are also included in this concept. Thus, an investment, in economic terms means an increase in building, equipment, inventory.
(2) Financial Investment: This is an allocation of monetary resources to assets that are expected to yield some gain and return over a given period of time. It is a general or extended sense of the term. It means an exchange of financial claims such as shares and bonds, real estate, etc. Financial investment involves contracts written on pieces of paper such as shares and debentures. People invest their funds in Shares, Debentures, Fixed deposits, National Saving certificates, Life Insurance Policies, Provident Funds etc. In their view, investment is a commitment of funds to derive future income in the form of interest, dividends, rent, premiums, pension benefits and the appreciation of the value of their principal capital.
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