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 in the event that it generates profits.
For the economy and finance, investments have to do both with saving, 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 set of actions in order to increase the product of the profits generated by that fund or business project.
Every investment involves both a risk and an opportunity. A risk to the extent that the return of the money invested is not guaranteed, nor 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 return, that is, the profitability that is considered to be positive or negative. The accepted risk, that is, uncertainty about performance, the possibility that the investment will not recover. And finally the time 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.), depending on the function in the enterprise (renovation, 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 based on 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 no the future is known.