What is Investment? This is Definition, Types, and Examples - Investment is an activity to invest, either directly or indirectly, with the hope that in the future the owner of the capital will get a number of benefits from the results of the investment. In the Big Indonesian Dictionary, investment means investing money or capital in a company or project for the purpose of making a profit. In general, investment can be interpreted as spending or using time, money or energy for future benefits. So, investment is buying something that is expected in the future to be resold at a higher value than before.
What is investment?
The following is the definition of investment according to several experts and institutions:
1. Reilly & Brown
Investment is a person's willingness to allocate money in a certain value in the present in order to obtain revenue in the future.
2. Bodie, Kane, & Marcus
Investment is a person's willingness to allocate money or valuable resources at this time and hold it for a specified time in order to receive profits (profits) in the future.
3. Dornbusch
Investment is the expenditure provided to increase or maintain the components of capital goods.
4. Financial Services Authority (OJK)
Investment is an investment that is usually carried out in the long term, to procure the purchase of shares and other securities for profit.
Investment goals and benefits
Investment has various objectives according to the type of investment. For example, a pension fund investment aims to get some funds in old age or retirement. If the investment is made by individuals, the goal is to accumulate funds to buy a house or land in the future and finance the education of children in the future.
Individual investment also aims to get a better life in the future, maintain income from inflation, and leave a legacy for the family.
Investments made by foreign parties in a developing country aim to improve the welfare of the people in that country. For developing countries, foreign investment will be useful for expanding employment opportunities, building facilities and infrastructure, developing technology, and encouraging industrial development.
1. Financial freedom
One of the investment goals is financial freedom, where a person is considered to have been able to get passive income to meet the needs of life in the long term.
2. Protect assets from inflation
The next goal of investment is to protect assets from inflation. Inflation that occurs continuously every year can make the value of assets decrease. With investment, assets also develop to produce added value so that they can offset the scourge of inflation.
3. Increase wealth
Indeed, the benefits and purpose of investment is to increase the number of assets or wealth owned. For someone who works, the return on investment is certainly an additional income.
4. Emergency needs
Many people choose investment because it is a safe way when experiencing an emergency. This is because in the future, sometimes there will be costs that must be incurred in large amounts, while the monthly income is felt to be insufficient. Some emergency conditions include investments such as the cost of renovation or buying a house, education costs, pilgrimage fees, to hospital costs if you get sick in the future. That's information about what investment is, its types, goals and benefits. It can be said that investment is the activity of investing or buying assets with the aim of making profits in the future.
Investment Type
There are various forms or types of investments. Some types of investment are:
Property Investment
Property investment is an investment in physical form. In general, property investment can be very profitable, because the price will continue to increase every year. Examples of property investment are buying land, and buying a house which can then be sold or rented.
Gold Investment
Gold is the easiest and most classic form of investment. Gold investment can be in the form of precious metals, jewelry, gold bars and gold vouchers (digital gold).
Mutual Fund Investment
Mutual fund investment is defined as a forum used to raise funds with investors to be invested in the investment manager's portfolio.
Deposit Investment
Deposit investment is used if the existing money is to be saved for a long period of time. The term of the deposit is between 3 to 12 months. The types of deposits that are usually chosen by the millennial generation are time deposits, certificates of deposit, and deposits on call.
Stock Investment
Shares are a sign of ownership in a company. The higher the risk of a stock, the higher the profit that will be obtained, so it requires the ability to analyze the accuracy of the placement of capital for investment.
Cryptocurrency Investment
Currently Cryptocurrency or crypto currency is increasingly known to the public to be used as a type of investment. Cryptocurrencies have no clear fair value. The easiest way to do this is to buy coins. The best coins are coins that are used by many people today and have a more massive potential in the future, as quoted from the book 'Momento Cryptocurrency Trading Techniques' by Alief K.
In making an investment, there are several processes that must be followed, namely:
1. Determine the purpose of an investment and determine the amount of funds to be invested. There are two things that are emphasized, namely the expected rate of return of funds and the availability of the amount of funds invested.
2. Conducting an analysis of securities or securities that are mispriced using fundamental and technical approaches.
3. To form a portfolio or group of investments by identifying each of its securities to determine which investments to add funds to.
4. Revise portfolio performance by weighing the composition of the portfolio that has been formed that is not in accordance with investment objectives.
5. Evaluate portfolio performance by calculating the level of expected profit and the level of risk borne.
Investment is often juxtaposed with speculation, to be referred to as investment according to world economist Benjamin Graham, all activities that have been thoroughly analyzed and promise a return on capital and adequate returns. In addition, the main difference between investing and speculating is the level of risk and guarantee of receiving a return on capital. Investors will be sure they will not lose capital. Meanwhile, speculators know very well that there is a high probability that they will fail in their investment.