Investment and Risks Investment Definition

Developments in all sectors of business either, communications, business, agriculture, and even investment seems increasingly rapid progress over time. Easy-paced modern era offers workmanship, use, and very practical use. It does not escape from the world of investment. Investment is to spend some money or save money on something with the hope that the financial benefit.

Examples of investment is the purchase of a financial asset such as bonds, stocks, insurance. Can also purchase items such as a car or a property such as a house or land. More breadth of investment can mean the purchase of capital goods production in an effort to purchase the machine for example. Even the provision of education and training for employees who make more proficient in the work can be regarded as an investment. The similarity of all the above investment is hope of gain at a later date.

Investment is often also called investment or capital formation. So an expenditure can be regarded as an investment if it is intended to increase production capability. Investment is important in the economy. In economic terms there is "there is no (economic) growth without investment". This statement implies that the investment has a very important role in economic development, even if the investment is not the only component of economic growth. In economic development, investment has two important roles.

First, the role in the short-term form of influence on aggregate demand which will lead to greater output and employment. Second, the effects on capital formation. The investment will add to the variety of equipment, machinery, buildings and so on. In the long term, this will increase the potential output and encourage sustainable economic growth.

Ownership of financial assets in order to invest in an institution / company can be done in two ways:

1. Direct investment (direct investing) Interpreted as an ownership of securities directly in an institution / company that has been officially specified in going public with the purpose of obtaining a profit rate of dividends and capital gains.
2. Indirect investment (indirect investing) Occurs when a traded securities held back by investment companies that serve as intermediaries. Ownership of assets is done indirectly through financial institutions listed, which acts as an intermediary. In his role as an indirect investor, middlemen get dividends as well as in direct investments and capital gains or portfolio trading results does.

Investment theory, is the theory of demand for capital. Some of the application of the theory is still in business investment, residential investment, and inventory investment. First, it must understand the dynamics of investment and capital is determined by the "stylized fact": the investment flows are too small compared to the capital stock. Investing often refers to the purchase of financial assets or physical, we say someone "invest" in stocks, bonds, and home when he bought the asset.

All types of investment always has the risks, there is no risk-free investment, the risk is always inherent in any large or small investment and can also be said that high yields are also high risk thus required an understanding of the risks associated with alternative investment vehicles which may consist of risk liquidity, uncertainty of outcome, yield loss, impairment of investments until the investment is risk of loss of capital.

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