Definition of Investment and Factors Affecting It (Complete)
Definition of Investment and Factors Affecting It (Complete) – On this occasion we will discuss about Investment and what are the factors that influence it.
Definition of Investment and Factors Affecting It (Complete)
Let's discuss the full details of the investment below carefully.
Definition of Investment
The definition of investment is one form of spending a certain amount of capital that has the goal of make a purchase of a physical asset which can be in the form of machinery, equipment, factory, property or stock.
There is also another understanding of investment, namely a commitment of resources or other funds that exist now, the purpose of which is to be able to bring in a number of benefits in the future.
In analysis in the economic field, the term investment itself can be linked to physical investment as this physical investment is able to create new assets that can be used for investment increase the credibility of production within a country, while a financial investment is only able to transfer the existing ownership of individuals in an institution to others.
The term investment also has something to do with various activities. Invest funds in physical (real) assets such as machinery, land, gold and bonds and assets financial such as stocks, bonds, deposits which are forms of investment activity that are usually frequent done.
For an investor who is smart and willing to take risks, the investment activities they do can also include all investments in other higher-priced financial assets such as options, warrants, futures and even equities International.
Factors Influencing Investment
There are several factors that affect investment, namely:
Expected Rate of Return
External and internal conditions and circumstances within a company greatly influence this factor. Internal conditions, namely one level of efficiency in a production & distribution process, the quality of existing resources, or the quality of the technology used.
Meanwhile, external conditions are an estimate of the level of production, domestic or international economic developments and government policies.
Interest Rate
An important factor that also determines a number of investment costs is the loan interest rate. If the interest on this loan is higher, the investment costs will also be more expensive.
Conducive Business Climate
A policy from the central government or from the local regional government that supports the investment climate or makes investors interested. For example, as in an area that provides convenience in granting business licenses, as well as repairing an infrastructure and so on.
Market opportunity
A decision in investing must also have a market opportunity, otherwise there will be no profit. If the greater the market opportunity for production results, the greater the profit for the investment.
Availability of Factors of Production
When talking about production, this cannot be separated from the factors of production used. All kinds of forms of availability of factors that can affect the increase in production are numerous and easy to obtain, creating a lot of interest in investing.
An example is like if there is a place that has extraordinary beauty, good natural conditions, and so on potential resources, then this will also make a lot of investors who want to invest some money on the spot the.
Guaranteed Security and Political Stability
An area must be safe and secure if these investors want to invest their money in that place, because if in a place or area there is often commotion or riots, this will also reduce interest investors. Investors also will not want to take high risks which can cause losses to them if the investment site does not have good political stability.
Investment Types
The following are the types of investment including:
1. Fixed Investment
Fixed Investment is one investment that is for the long term and also durable. For example, as in the investment company household itself consists of machinery, equipment, and buildings.
2. Housing Investment
Housing investment is one type of investment that is manifested in the form of buildings that are used as residences. Investors are interested in this type of housing because its value will get higher over time.
3. Inventory Investment
Inventory investment is one type of stock investment that is used as a reserve to anticipate rising demand. The company produces goods and services by exceeding the existing target. This excess amount of production is used as a reserve if there is a surge in demand.
4. Net Investment and Additional Capital Goods
Net investment is all additional capital goods that exist in a certain period. The net investment does not take into account additional capital goods which are in the nature of replacing existing capital goods. Net investment itself is calculated on the gross investment minus depreciation.
Investment Benefits
The following are some of the benefits of investing, including:
Fight inflation
Inflation that occurs every year can cause the value of the currency to decrease. Without investment, the value of the money you have will always be eroded every year. Therefore it is important to look for investments with a return value which is higher than the percentage of inflation.
Adding a source of income
By investing, indirectly you will get another source of income. Therefore, it is recommended that you set aside a portion of your monthly salary to invest, so that your monthly salary will also work!
Reach financial goals faster
For example, you need funds of IDR 100 million which are used for housing down payment. If you only save IDR 1 million / month, then here you need more than 8 years. However, if you invest with an average return of 12% per year, then here you will achieve this goal in less than 6 years.
To Create A Frugal Lifestyle
Suapata someone can apply a lifestyle to be more efficient. Why? because, by investing someone will try to live more economically, and be consistent in order to keep investing.
Which in the end the person will become more focused on investing, and avoid buying things that are not important and are consumptive in nature.
Avoiding Debt
From a more frugal lifestyle, because the focus is divided on making investments, then this can also make the person avoid debt.
That's the discussion about Definition of Investment and Factors Affecting It (Complete) which can be understood so that we are more careful in investing. Hopefully helpful, and thank you.
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