Meaning of Investment and it differ from speculation?

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Fund used to get additional income is called investment. It is done to increase the value of property or to get extra income. The essential of doings investment is to wait time to get something return from it. In this sense investment is using fund at present to get additional return in future. Generally, investment involves real assets or financial assets. Real assets are tangible, material thing such as building, automobiles, machinery, factories and text books. Whereas financial assets are prices of paper representing an indirect claim to real assets held by someone else there pieces of paper represent debt or equity and stock certificate.

Investment may be defined as he purchased by an individual or institutional investor of financial or real assets that produces a return proportional to the risk assumed over future investment.

Elements of Investment

a)      Return: it is the reward obtained in future for taking risk in the investment at present.

b)      Risk: risk is present in every alternative investment. Uncertainty in return from investment is called risk.

c)      Time: time is another important factory for investment, which offers different courses of action.

Investing verses Speculation

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SN	Investment	Speculation
a	Investment is less risky	Speculation  is more risky
b	Investment is long time horizon	Speculation is short time horizon
c	Investment is done with amount of enough information	Speculation is done with limited information