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In theoretical terms, investment means the purchase (and thus the production) of capital goods which are not consumed but instead used in future production. For example, building a railroad or factory, clearing land, or putting oneself through college is an investment in the hopes of future financial return. Investments are a crucial aspect of economics. An increase in income will encourage higher investment, whereas higher interest rates will discourage investment as it becomes too costly to borrow money. In finance, investment means buying securities or other monetary or paper assets. The method for assessing whether a potential investment is worth its price is called valuation.
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