An investment is made with the objective of making a profit in the future.
The Latin word inversio is the etymological origin of the current term investment that we are now going to analyze. Specifically, we can determine that it is made up of the sum of three parts: the prefix in – which can be translated as “inwards”, the word versus which is synonymous with “turned around” and finally the suffix – ion which is equivalent to “action.”
An investment , in the economic sense, is a placement of capital to obtain a future profit . This placement represents a choice that gives up an immediate benefit for a future and, generally, improbable one.
Investment example
A man has a savings of $20,000. With that money, you can buy a car . However, you decide to invest that money in shares of a company with the aim of selling them later at a higher price.
The $20,000 you invest in stocks can become $40,000 in five years. At that moment, the subject will reap the benefit of his investment and will have doubled his capital, so he will be able to buy the vehicle and have money left over. However, let us remember that, at first, he left aside the immediate satisfaction of a desire (the purchase of the car).
Companies and the use of their capital
Companies tend to make investments all the time. Some are necessary for your daily functioning (such as purchasing computers ). Others are specified with a view to the future, such as the purchase of expensive machinery that will allow you to increase production.
Thus, a textile company that has a production capacity of 1,000 pants per day, decides to acquire a machine to produce 2,000 pants per day. Initially, the investment will involve an expense for the company, since it will have to spend money to buy the machine. The objective will be to recover that money by increasing production and, over time, obtain more profits than what it achieved before the acquisition.
Investments usually carry some risk.
Investment plan and investment fund
Furthermore, within the business field we find what is known as an investment plan. Specifically, it is a project where the destination of the financial resources that a company or company has is clearly stated.
And all this, yet it is not very common to talk about what we call an investment fund. A term with which we refer to the fund where the capitals that a certain number of people are going to allocate to carry out investments of different types and depth are pooled.
Caba highlights that an investment contemplates three variables: the expected return (how much is expected to be earned), the accepted risk (how likely is it to obtain the expected profit) and the time horizon (when will the profit be obtained).
Other uses of the term
However, we cannot ignore the fact that investment is a word that, in the same way, is used as a synonym for homosexuality.
But there is still more. Investment is also a word that is used within the music sector. Specifically, it is used to define a change in the placement of the notes of a given chord in a position that is not the one usually used. In this way, a notable change with respect to the original position is obtained as a result.