1. The process of adding to stocks of real productive assets. This may mean acquiring fixed assets, such as buildings, plant, or equipment, or adding to stocks and work in progress. Investment goods are goods designed to be used for investment rather than consumption. Gross fixed investment is spending on new capital equipment; net investment is gross investment less capital consumption, an estimate of the loss of value of capital goods through wear and tear, the passage of time, or technical obsolescence. Investment allowances are tax allowances which lower taxation on the profits of firms which invest. Foreign direct investment is investment spending carried out abroad. Some forms of spending designed to raise future productivity, such as research and development (R&D) to produce new technical knowledge, and training to improve the skills of the workforce, are conventionally not counted as investment, although as they add to the stock of human capital they logically could be.

2. The acquisition of financial assets, such as company shares. ‘Investors’ are the people who own such assets; ‘investments’ are what they hold. In the sense of a list of assets this is a stock concept. Investment trusts and investment banks are financial institutions which typically hold securities as investments, in this sense, rather than themselves conducting physical investment. Investments in the financial sense are often used to fund investment in the physical sense, for example when companies sell new shares to finance the building of new factories. The two senses of investment are not invariably linked, however: real investment can be paid for from retained profits, without the use of financial intermediaries, and firms can use the proceeds of share issues to pay off debt or to finance the acquisition of other firms, rather than spending the money on physical investment. Investment is often considered in conjunction with savings. At the world economy-wide level, investment and savings ex post, on some definition, must be equal. At the level of the individual, firm, government, or country, however, there is no reason why savings and investment should be equal either ex ante or ex post. See also autonomous investment; foreign investment; induced investment; inward investment; planned investment; replacement investment.