Investments, in finance and economics, has different meaning but serves the same purpose of boosting business growth. In finance, an investment means the allocation of resources or input of money with the expectation of long –term benefit. This means that an asset or good will be bought with the assumption or hope that it will have more value of use in the future or sold at a greater value. Usually, most financial investments will pose some sort of risk and a higher risk will in most cases offer higher reward. Thus, a higher prevailing interest rate is usualyl beneficial to financial investments.
Conversely, investment in economics typically refers to borrowing in order to purchase capital in hopes of raising future income. In this case, investments actually benefit from a lower interest rate so that less interest has to be repaid on the loan. Investments are directly related to savings in economic theory. Investment can be used to raise regular capital, but can also be used to raise human capital such as through tuition fees for higher education.
An economic investment is the net addition to the capital stock of society that includes the goods and service used in production. Net additions to capital stock entail an increase in buildings and inventories of existing goods and services. The financial and economic meaning of investment share the idea of how an investment is how individual’s savings are imputed into capital market and divided into capital financing¹.
1. June 20, 2010. Financian and Economic Meaning of Investment. Retrieved from http://www.mbaknol.com/investment-management/financial-and-economic-meaning-of-investment/