Concept and Principals of Investments - Bunu Mariana

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Topic 1. Concept and Principals of Investments The general idea of investment is that the investor accepts not using the available resources today, so that he would have a higher amount of resources in the future. • An investment may be defined as the purchase by an individual or institutional investor of a financial or real asset that produces a return proportional to the risk assumed over future investment period. • In other words, investment represents the totality of financial and material resources allocated to create, modernize or extend the economic activity with the reason to earn profit. Investment definition may have several meanings, two most relevant: • 1) An investment as a financial or tangible asset which is acquired on purpose to get a profit in the future. It is an instrument that promises some certain or uncertain return in the future. • 2) An investment as a process (investing) when tangible or financial assets are acquired on purpose to earn more money (or other material benefits) than was spent when investment was made. If acquisition is made without an intention to profit from it, then it is spending but not an investment. The term investment, it carries slightly different meanings to different sectors.According to economists, investment is the utilization of resources in order to increase income or production output in the future. According to business theories, investment is that activity in which a manufacturer buys a physical asset, for example, stock or production equipment, in expectation that this will help the business to prosper in the long run.On the other hand, finance professionals define an investment as money utilized for buying financial assets, for example stocks, bonds, bullion, real properties, and precious items.According to finance, the practice of investment refers to the buying of a financial product or any valued item with an anticipation that positive returns will be received in the future.Accounting approach;Psychological approach ...