Investment is an economic term that refers to the placement of capital in an operation, project or business initiative in order to recover it with interest if it generates profits.
For the economy and finance, investments have to do both with saving, as well as with the location of capital and aspects related to consumption. An investment is typically an amount of money that is made available to third parties, a company or a group of shares in order for it to increase as a result of the profits generated by that fund or business project.
Every investment involves both risk and opportunity. A risk to the extent that the return of the money invested is not guaranteed, and neither are the profits. An opportunity in as much the success of the investment can imply the multiplication of the placed money.
In private investment, three different variables are usually considered. The expected performance, that is, the profitability that it is considered to have in positive or negative terms. The accepted risk, that is, the uncertainty about the performance, the possibility that the investment will not recover. And finally the temporal horizon, or the short, medium or long term period during which the investment will be sustained.
In turn, an investment can be classified according to the object of the investment (equipment or machinery, raw materials, participation in shares, etc.), according to the function in the undertaking (renewal, expansion, improvement or strategic), and according to the subject or company that makes the investment (private or public).
An investment is the basis of almost any economic project, since a new venture is usually supported by the capital received for its management and, therefore, depends on the shareholders willing to assume the risk of investing in a new initiative of which they do not the future is known.
