Investment is spending on physical assets that are not for immediate consumption but for the production of consumer and capital goods and services. Investment has two related meanings, it could mean the actual production of actual capital in economic theory, such as building a new factory, buying new vehicles, etc. And it could also mean in financial terms, the deposit of money in the bank, the purchase of shares or government securities, etc.
The factors that determine the investment include the following:
1. Savings: The amount of money saved determines, to a large extent, the level of investment.
2. Income level: The higher the income obtained, the higher the level of investment and vice versa.
3. Tax Rate: Higher taxes on one’s income reduce investment and vice versa.
4. Interest rate: High interest rate charged by banks discourages borrowing, leading to low investment, while low interest rate encourages borrowing, leading to high investment.
5. Expectation of the future: When an investor expects a better future, this will encourage him to invest.
6. Business environment: Investors are more interested in investing in a stable economy than those with economic instability
7. Changes in technology: The level of investment is greatly influenced by changes or improvements in production techniques through inventions and innovations.
8. Changes in the level of consumption: A high level of consumption generally leads to low investment and vice versa.
9. Earned Profit: High earnings earned by individuals or companies encourage investment, while low earnings discourage it.
10. Political Climate: Investment thrives in a politically stable environment, while investment slows down in places with political instability.
The various forms or types of investment are: individual investment, corporate investment and government investment. Individual investing is the type initiated by a household or individual for the purpose of increasing their income and raising their standard of living. In addition to your salaried job, you might have a farm investment where you sell poultry and poultry products, fish, livestock, and dairy products; Or you could invest in motor vehicles or real estate, etc. Corporate investment, on the other hand, includes investments by companies and other organizations with the sole objective of making a profit. Examples include investment in plant and machinery, buildings, etc. Government investment is the creation of corporations with the sole purpose of providing essential services rather than making a profit, e.g. provision of electricity, water, health services, etc.