What is an Investment? - Definition & Overview

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: What is Annuity? - Definition & Formula

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:02 Definitions
  • 1:01 Types of Investors
  • 2:53 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Speed Speed Audio mode

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Investment is paramount to sustained economic growth and the creation of wealth. In this lesson, you'll learn what an investment is and find out about different types of investors.


Investment is using money to purchase assets in the hope that the asset will generate income over time or appreciate over time. Consumption, on the other hand, is when you purchase something with the immediate intent of personal use and with no expectation that it will generate money or increase in value.

Investment also helps grow the economy because it creates economic activity, such as the buying and selling of goods and services and employing people. Employed people get paid and either save, invest, or spend their money. If they spend their money, businesses make more profits. Businesses can then reinvest the profits in further business activities that expand the economy.

Of course, too much of a good thing can be bad. If everyone is investing, then no one is consuming. If no one is consuming, consumer-orientated businesses, such as restaurants and retail establishments, will suffer. This may lead to layoffs. The key is to find the proper balance between investment and consumption.

Types of Investors

There are many types of investors, including governments, businesses, and individuals that invest in a wide variety of projects, resources, and even other businesses. Governments make investments through their fiscal policy, which is just an economic term describing government decisions relating to taxing and spending. Oftentimes, the government spends money to stimulate economic growth. Here are some examples of government investment:

  • Infrastructure - such as roads, bridges, dams, power plants, and communication systems
  • Education - including public primary and secondary schools and higher education
  • Scientific and technological research - either direct research undertaken by government employees or through grants given to private institutions, and
  • Subsidies to provide aid to certain industries

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account