Investment & Gambling

• Gambling is quite the opposite of investment. Typical examples are horse races, card games, lotteries, etc. 
• It consists in taking high risks not only for high returns, but also for thrill and excitement.
• It is unplanned and non scientific

Investment & Speculation

• Investment and speculation are closely related.
• Both involve purchase of assets-shares & securities. 

1. Risk
2. Capital Gain
3. Time period

Attitude towards risk

#1- Some investors are risk averse
#2- Some investors have affinity to risk

• Risk bearing capacity of an investor is a function of his income
• A person with higher income is assumed to have a higher risk bearing capacity

Each investor tries to maximise his welfare by choosing the optimum combination of risk and expected return in accordance with his preference and capacity

Objectives of Investment

Each investor tries to maximise his welfare by choosing the optimum combination of risk and expected return in accordance with his preference and capacity.
Investors’ objectives 

Characteristics of Investment

All investments are characterised by certain features.

• Returns
• Risk
• Safety
• Liquidity
• Tax Shelter

Economic Meaning of Investment

• Net addition to the economy’s capital stock which consists of goods and services that are used in the production of other goods and services.
• Formation of new and productive capital

• New construction
• Plant and machinery
• Inventories
• All these investments generate physical assets

Financial Meaning of Investment

Commitment of a person’s funds to derive future income or appreciation in the value of their capital.

• Future income may be
• Interest
• Dividend
• Premiums
• Pension benefits
• Purchasing of shares/debentures
• Post office saving certificates
• Insurance policies