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The creation of more money through the use of capital.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


The act of placing capital into a project or business with the intent of making a profit on the initial placing of capital. An investment may involve the extension of a loan or line of credit, which entitles one to repayment with interest, or it may involve buying an ownership stake in a business, with the hope that the business will become profitable. Investing may also involve buying a particular asset with the intent to resell it later for a higher price. Many types of investing exist, and each is subject to greater or lesser regulation in the jurisdiction in which it takes place. Legally, investing requires the existence and protection of individual property rights. Investing wisely requires a combination of astuteness, knowledge of the market, and timing.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


1. Property acquired for the purpose of producing income for its owner. Just as plants and equipment are investments for manufacturers, stocks and bonds are investments for individuals.
2. Expenditures made for income-producing assets.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


  1. physical or real investment: capital expenditure on the purchase of assets such as plant, machinery and equipment (FIXED CAPITAL assets) and STOCKS or INVENTORY (WORKING CAPITAL assets). Fixed capital investment is undertaken by firms, both to replace worn-out and obsolete capital items (see DEPRECIATION) and to increase the firm's total assets (see CAPITAL EMPLOYED), so as to enable it to produce a greater volume of products, and, by investing in the latest technology, to remain competitive. In aggregate terms, net additions to the country's CAPITAL STOCK increase the economy's productive capacity, thus making an important contribution to the achievement of higher rates of ECONOMIC GROWTH and improved living standards.
  2. financial investment: expenditure on the purchase of financial securities such as SHARES and BONDS. PORTFOLIO investment is undertaken by individuals, companies and financial institutions as a means of earning income in the form of dividend, interest and rent payments and through capital appreciation. See CAPITAL ALLOWANCES, ENTERPRISE INVESTMENT SCHEME, ENTERPRISE GRANT SCHEME, STOCK MARKET, FINANCIAL SYSTEM, FOREIGN INVESTMENT, SAVINGS, INVESTMENT INCENTIVE, INVESTMENT APPRAISAL, ACCOUNTING RETURN, PAYBACK METHOD, DISCOUNTED CASH FLOW.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson


  1. expenditure on the purchase of FINANCIAL SECURITIES such as STOCKS and SHARES. Also called financial investment. PORTFOLIO investment is undertaken by persons, firms and financial institutions in the expectation of earning a return in the form of INTEREST or DIVIDENDS, or an appreciation in the capital value of the securities.
  2. capital expenditure on the purchase of physical ASSETS such as plant, machinery and equipment (FIXED INVESTMENT) and STOCKS (INVENTORY INVESTMENT), i.e.physical or real investment. In economic analysis, the term ‘investment’ relates specifically to physical investment. Physical investment creates new assets, thereby adding to the country's productive capacity, whereas financial investment only transfers the ownership of existing assets from one person or institution to another.
Investment requires that an amount of current CONSUMPTION is forgone (i.e. saved, see SAVINGS) so as to release the resources to finance it. Investment expenditure is a component of AGGREGATE DEMAND and an INJECTION into the CIRCULAR FLOW OF NATIONAL INCOME. In 2003, investment expenditure accounted for 13% of gross final expenditure (GFE) on domestically produced output (GFE minus imports = GROSS DOMESTIC PRODUCT). See Fig. 133 (b) , NATIONAL INCOME ACCOUNTS. In NATIONAL INCOME analysis, investment in the provision of SOCIAL PRODUCTS such as roads, hospitals and schools undertaken by the government is counted as part of GOVERNMENT EXPENDITURE; thus, investment expenditure is normally defined as consisting only of private sector investment spending.

Investment can be split up into gross and net investment:

  1. gross investment is the total amount of investment that is undertaken in an economy over a specified time period (usually one year);
  2. net investment is gross investment less replacement investment or CAPITAL CONSUMPTION, i.e. investment that is necessary to replace that part of the economy's existing capital stock that is used up in producing this year's output. (See DEPRECIATION 2.)

The amount of fixed investment undertaken is dependent on a number of factors other than capital consumption considerations. In national income analysis, the MARGINAL EFFICIENCY OF CAPITAL/INVESTMENT and the INTEREST RATE are important determinants of the level of investment.

The marginal efficiency of capital/investment itself is dependent upon business confidence and expectations about future demand levels and, therefore, plant utilization. The volatility of business expectations in the short run means that planned levels of fixed investment can vary significantly over time, leading to large changes in the demand for capital goods (see ACCELERATOR), that is, large fluctuations in the investment component of aggregate demand leading to larger fluctuations in output and employment through the MULTIPLIER effect (see BUSINESS CYCLE).

In order to stimulate investment, governments provide tax writeoffs on plant and equipment (see CAPITAL ALLOWANCES for details).

Similar considerations apply to inventory investment, with stock levels being increased or decreased over time with changing business expectations.

The long-term significance of investment lies in the contribution it makes to ECONOMIC GROWTH and economic prosperity. Building new factories, adding new machinery and equipment, and investing in new techniques and products enables industry to supply a greater quantity of more sophisticated products and services to the consuming public, while similar investments in the provision of social capital (schools, health, etc.) contribute vitally to the upgrading of general living standards.

At the micro-level a firm's investment decisions depend upon the profitability or cash flow implications of particular investment projects (see DISCOUNTED CASH FLOW) and are considered as part of its CAPITAL BUDGETING procedures. Compare DISINVESTMENT.


Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
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The Muscat Securities Market recorded negative trends during the last four years amid macroeconomic challenges, weak investor sentiments and selling pressure from foreign investors. The benchmark index of MSM has further declined 11.5 per cent year-to-date during 2019.
Foreign investors are entitled to lease, own or transfer any land without any general limitation.
'Thanks to his efforts, more foreign investors invested in Shinhan Financial Group following his trips.' Following Cho's May trip to Hong Kong and Australia, the group's foreign investor ownership surpassed 70 percent for the first time on June 8 The stock price of Shinhan Financial Group also reached 47,450 won per share on the day, up 3,150 won, or 7 percent, from a week before his trip.
'There is a need for transparent and predictable policies to attract foreign investors, and this ad-hoc behaviour is a huge constraint in increasing FDI for the economy,' said Olierhoek who believes Pakistan's economy is performing only 20-25 per cent of its potential.
Do you expect the fund to resonate with foreign investors?
Foreign investors would also be allowed to buy up to Rs 35 billion in state government debt for each of those two periods, the RBI said.
Banks operating in the local market, most prominently the National Bank of Egypt (NBE) and Banque Misr, have started to work with contracts hedging against exchange rate fluctuations, guaranteeing a fixed dollar exchange rate against the pound for foreign investors who will invest in Egyptian pounds in the Egyptian treasury bill.
Irena Jakimovska, Vice President of the Council, stressed that foreign investors not only contribute for increasing the competitiveness of domestic companies and boosting the export and bolstering new employments, but also carry out new practices, introduce technological innovations and knowledge and have more efficient corporative management.
Addressing the conference on investment diversification in Kuwait, chief of Kuwait Anti-Corruption Authority (KAA) Abdulrahman Al-Nimesh, said the authority he heads is a safety valve for insuring lucrative and safe investment in Kuwait for foreign investors. He said the KAA watches carefully all foreign direct investments in the country with the view to give the investors the peace of mind that their investments are well-protected through Kuwait's multiplicity of government oversight agencies and legislations favoring foreign investment.
Significant conclusions as to how foreign investors active in Cyprus see the island as well as to the problems they face have emerged from a survey -- the second in two years -- carried out by the Cyprus Investment Promotion Agency (CIPA).
8, 2013, the US Securities and Exchange Commission (SEC) brought charges against a Chicago regional center for defrauding close to 300 foreign investors out of $156 million.
The value of stocks sold by foreign investors over the last five days comprised 45.1 per cent of the total value of stocks traded during the period.

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