Definition: Money spent on acquiring a commodity which has the potential of making future income or wealth is known as investment. In simple terms, investment is engaging money today to maximise it in the future. An investor can be anyone, an individual, a business entity or even the government.
The return on any investment is merely based on two aspects:
Investor: An investor can be any individual, firm or organisation who has the potential of engaging one’s capital for a long-term period (usually more than a year) to earn profit or wealth in future.
Speculator: Speculators usually invest the borrowed sum in the high-risk bearing opportunities for a short-term period (not exceeding six months) to earn high returns. They rely on calculations based on market trend, psychology and technical analysis.
Trader: Traders are the ones who deal in the derivatives market or the stock market, buying and selling their holdings within a day or a week or a month. They aim to earn a profit in the form of margins derived from price fluctuation.
Gambler: Gambler is the person who put in money or valuables without any basis or calculations in a game of luck or chance. He/she invests in betting, playing cards, tosses, etc., knowing that the outcome is uncertain.
The investment made to acquire the possession of any tangible or intangible asset is known as ownership investment. Some of the types of ownership investments are:
Lending investments can be understood as buying of repayable debts to earn interest in future.