Definition of Investment: Benefits, and Types of Investment

Definition of Investment in General

What is Investment? Investment is an activity to place funds in a certain period in the hope that the use of these funds can generate profits and / or increase the value of investment.

In language, according to Wikipedia the notion of investment is a term used for activities related to accumulation in the form of assets as an expectation of profit.

Someone who invests is known as an investor. Investment is also sometimes referred to as investment (read: understanding capital) to a company. So the term investment is already very well versed in the field of business.

The term investment is no stranger to business people. Investment deals with matters relating to finance and economics.

Definition of Investment According to Experts

Some experts in the field of economics have explained what investment is, including:

1. Haming and Basalamah

According to Haming and Basalamah, investment is the current expenditure for the purchase of real assets (property, cars, etc.) or also financial assets with the aim of obtaining greater returns in the future.

Investment is closely related to the activity of withdrawing sources of funds used for the procurement of capital goods now. With capital goods, it is expected to produce a new product flow in the future.

2. Mulyadi

According to Mulyadi, investment is the linking of sources of funds in the long run to get profit in the future.

3. Sadono Sukirno

According to Sadono Sukirno, investment is the activity of spending or spending by investors to buy capital goods and production equipment with the aim of increasing the ability to produce goods and services available in the economy.

4. Henry Simamora

According to Henry Simamora the definition of investment is an asset that is used by companies to increase their wealth through the distribution of investment returns (for example, interest income, royalties, dividends (read: Definition of dividends ), rental income, and others) to appreciate the value of investments or also for other benefits for a company that makes investments through trade relations.

5. Sunariyah

According to Sunariya, investment is investment for one or more assets owned which usually have a long period of time in the hope of earning profits in the future.

6. James C VanHorne

According to James C. VanHorne, meaning investment is the activity of utilizing cash at the moment, with the aim of getting goods in the future.

7. Fitz Gerald

According to Fitz Gerald, investment is an activity that is related to efforts to withdraw various sources of funds that are used to procure capital goods now. These capital goods will then be expected to produce new product flows in the future.

8. Salim HS and Budi Sutrisno

According to Salim HS and Budi Sutrisno, investment is an investment activity by investors, both local and foreign investors in various types of business fields that are open for investment. The purpose of investors investing is to make a profit.

Also read: 6 Mutual Funds tips for beginner.

The Purpose of Investment in Business

The Purpose of Investment in Business

From the understanding of investment mentioned above, investment is an investment activity that has several objectives. The objectives of the investment include:

1. Get a steady income

For example, if you invest in a company, then you are entitled to get a few percent of the company’s profits on a regular basis as long as you invest in that company. So in this case you will continue to receive royalties or benefits.

2. Enlarge the business

Besides in the form of profits in the form of money, by investing can be used for social purposes, enlarge the business and others.

3. Business Guarantee

If you invest in a supplier, there will be a guarantee that your business will not lack raw materials and continue to gain a market for selling products.

4. Reducing Competition

Investment can also reduce competition between companies engaged in the same field.

Also read: Definition of Deposits

Benefits of Investing in Business

Benefits of Investing in Business

Related to the investment objectives mentioned above, many entrepreneurs make investments with the main objective of making profits and expanding businesses.

Referring to the meaning of investment which means as a form of investment, investment in business is beneficial for:

1. Increase Assets

One example is when someone buys land or property today as an investment, then sells it in the future at a value that is many times the price when buying it.

2. Meeting Future Needs

The purpose of investing now is to be used as a support for the necessities of life in the future. One example is investing in gold, where the aim is to be sold in the future as a children’s education fund.

3. Lifestyle Savings

By investing, someone will try to allocate money for important things. In the end this will make the person more efficient.

4. Avoiding Entangled Accounts Payable

Still related to point # 3, with a thrifty and simple lifestyle, of course someone will avoid debt problems.

Those who have committed to invest regularly will avoid debt and debt problems. And finally it will make the finances better.

Forms of Investment

Forms of Investment

In general, the form of investment can be divided into two, namely:

1. Investment in Real Assets

This is an investment that someone makes in the visible or physical form. For example; investment in gold, property, land, precious metals and others.

2. Investment in financial assets

This is an investment made by someone in the form of securities. For example; stocks, deposits, and so on.

Types of Investment

There are several types of investments that are common in the business world, including:

1. Deposits

Investments in the form of money deposits to a company with a guarantee that investors will receive benefits in the form of interest within the agreed period. Investments in deposits are divided into time deposits and certificates of deposit.

2. Stocks

Investments in the form of shares are common in large companies. Shares are another form of assets (read: understanding assets ) of the company.

For example, if you have a 50% stake in a company, then you might have half the assets of the total assets of the company. Shares are generally made in the form of securities that indicate ownership.

3. Bonds

Bonds are generally carried out on businesses that provide capital loan services. The profit gained by bond investment is higher than the deposit because the interest rate is also higher.

But this method is more risky because if the capital borrower goes bankrupt then there is a possibility that the debt will not be paid.

4. Mutual funds

In addition to stocks, mutual funds are now also popular with business people and the public. Mutual funds are a place to collect money collectively and the collected funds will be managed by the manager.

Profit and loss will be shared equally among all investors. So because of that mutual funds can also be called a gathering place for investors.

5. Property Investment

This type of investment includes non-real investment because it is not in the form of money but in the form of buildings such as houses, buildings or apartments. This form of investment is arguably the most profitable because property sales prices rarely go down even up.

6. Gold

Investment can also be in the form of gold. As with property, gold investment tends to be more profitable than real investment. Generally the gold invested is gold bar.

Also read: Definition of deflation

Above was a brief explanation of investment understanding, investment objectives and benefits, and types of investment. May be useful.

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