Hi friends, in today’s article we are going to know about the concept of investment and also know the different types of investment. So let’s discuss in details.
Table of Contents
What is Investment?
In ordinary sense investment means to buy shares, securities, stocks, etc. In an economic sense an investment is the purchase of goods that are not consumed today but are used in the future to generate more income or wealth. As for example – L.I.C.
Real investment and Financial investment
Financial investment means to buy shares, bonds, stocks and securities which are already existing in the stock market. It means transfer of existing assets which does not affect aggregate spending.
Real investment implies additions to the stock of capital. In other words real investment or simply investment refers to new expenditure incurred on creation of new buildings, roads, new machines, equipment, bridges and other forms of productive capital.
Discuss Different Types of Investment
There are different types of Investment which are explained in the following ground-
• Private Investment – The private investment is the investment undertaken by the private capitalists or entrepreneurs. The basic purpose of private investment is to obtain profits.
• Public Investment – The investment undertaken by the government or some department of government is called public investment. As for example – The government undertakes spending on railways, road transport, water supply, etc.
• Gross Investment – Gross investment is the total amount spent on capital goods in a particular production period usually one year. It includes both spent by the government and private entrepreneurs.
• Net Investment – Net investment is the investment for rising the stock of capital in a particular year. It involves construction of new factory, machines, buildings, capital equipment.
It can be defined as the excess of gross investment (Ig) over the replacement investment (Ir).
In = Ig – Ir
Where,
In is the net investment, It can also write as Ig = In + Ir
Conclusion
So friends, this was the types of investment. Hope you get the full details about it and hope you like this article.
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