Definition of Investment: The Purpose, Function, and Type

What is investment? The definition of investment is the expenditure made by investors and companies to buy capital goods and production equipment to increase the ability to produce goods and services available in the economy.

Understanding the definition of investment is necessary before you plunge into the world of investment to be able to multiply your assets or assets.

What is Understanding Investment

The true meaning of investment comes from the word "investire" which means to use or use. Based on the meaning of the speech, the meaning of investment is to give something to other people to be developed and the results of something that is developed will also be divided according to what was promised.

In order to better understand the meaning of the word investment, I take some of the definitions and definitions of investment taken from various sources:

Understanding Investment According to Wikipedia

Investment is a term related to finance and economics. Investment is related to the accumulation of one form of asset with a desire for future profits. Sometimes, investment is referred to as investment.

Definition of Investment in Indonesian Encyclopedia
According to the Indonesian Encyclopedia, investment is investing or investing money in a production system by buying buildings, machinery, reserve materials, administering cash and making changes. In this case the capital stock of goods is enlarged as long as there is no capital of goods to be exchanged.

The meaning of investment in the above definition is only limited to the production process.

Definition of Investment According to Economists

In accordance with economics, the meaning of investment is the expenditure of investors or companies to procure some capital goods and production equipment to increase the ability to produce goods and services that exist in the economy.

For more details, below are some of the definitions of investment discussed by several economists:

1. Salim HS and Budi Sutrisno

The definition of investment according to Salim HS is investment done by investors, both foreign and domestic investors in a variety of business sectors that are open to investment, which have the aim of making a profit.

2. According to Fitzgeral

Definition of Investment according to Fitzgeral is an activity related to the effort to withdraw resources (funds) used to make capital goods in the present and with these capital goods, a new product flow will be made in the future.

3. According to Kamaruddin Ahmad

According to Kamaruddin, the definition of investment is to put money / funds with the desire to obtain additional or specific benefits for the money / funds.

If examined, there are 3 definitions of investment according to Kamaruddin, namely:

Investment is the act of buying shares, bonds, or other securities.
That investment is the act of buying goods used for capital.
The investment is the use of existing funds to be used in production with future income.

Investment Functions and Objectives

In general, the investment function is to procure capital goods and a variety of production equipment that has the purpose of replacing or adding capital goods in economic activities which will be used to produce goods and services.

Whereas the purpose of investment is to obtain fixed income, ensure the procurement of raw materials, maintain cooperation between businesses, to obtain markets for products made, and so on.

Types of Investment

Investments can be divided into 4, namely:

1. Investment Based on Assets

Real assets, tangible investments, such as property.
A financial asset, is an indirect claim document from the holder on a real activity of the party that issued the security.

2. Investment based on influence

Autonomous investment, investment that is not affected by the level of income.
Investment included, investment influenced by demand for goods / services.

3. Investment Based on the Source of Funding

Sourced from foreign capital.
Sourced from domestic capital.

4. Investment Based on Its Form

Portfolio investment, through the capital market with securities instruments.
Direct investment, through development, purchase or acquisition of other companies.

Conclusion

Above was an explanation of the definition of investment, the function and purpose of investment, and types of investment. As a summary of this article, the notion of investment in a nutshell is an activity undertaken by investing certain capital to get certain profits in the future.

Sometimes there are those who consider investment the same as business. But, of course investment is not the same as business, although the two are often interrelated.

Eka Wahyu Budi Santoso

Bukan siapa-siapa, hanya orang gabut yang pengen berbagi informasi (yang mungkin tidak penting).