Investment Abbreviations

An investment, in economic terms, is capital that is invested in order to obtain returns in the term. This application supposes a choice that resigns an immediate benefit for a future and, in general, improbable.

For example: a man has a savings of 20,000 euros. With that money, he can buy a car. However, he decides to invest that money in a company’s shares in order to sell them later for a higher price. Those 20,000 euros invested in shares can be converted, over a period of five years, into 40,000 euros. At that time, the person will be able to benefit from their investment and will see their capital double, with which they will not only be able to buy the vehicle but also have money left over. However, it is worth remembering that, initially, he had to give up the immediate satisfaction of a desire (the purchase of the car).

Financial products are divided into two types: fixed income and variable income, with each of these applications having its own risks, yields and redemption period, for example.

Fixed income is a type of investment that has very clear rules on how much your money will yield, and it has rules, deadlines and calculations of how this remuneration will be paid and calculated for the investor. In this regard, one of the most popular types of fixed income investments is direct treasury.

Variable income, on the other hand, is investments that can vary, where the income can be scaled over time , and can be positive or negative, according to the market. In this case , one of the most used variable income investments on the market is the stock exchange.

Companies tend to make investments with some frequency. Some are necessary for your daily functioning (such as buying computers, for example). Others are carried out with a view to obtaining profits in the future, such as the purchase of an expensive machine that allows for increased production.

Making a good investment is not magic, but it is enough to understand how the finance market works and thus choose the investment or investment category that best fits your profile.

In this light, a textile company whose daily production capacity is 1,000 pants decides to acquire a machine to produce 2,000 pants a day. In the beginning, the investment will constitute expenses for the company, taking into account that it will have to pay money to buy that machine. The objective is to recoup that money through increased production and, over time, make more profits than you could before purchasing the machine.

An investment includes three variables: the expected return (how much you expect to earn), the accepted risk (how likely you are to obtain the expected return) and the time horizon (when you will make a profit).

We can see investments as a way to increase your capital without you having to work harder to do so. Investors often call this “making your money work for you”.

In Brazil, there are several ways to make an investment, from investments in savings accounts, in government bonds, in shares, in real estate funds, etc. It is also seen as an investment when you apply a certain amount to open your own business.

It is important not to confuse investing with betting. A bet is like shooting in the dark, while investing is a way of making your money appreciate, even in the case of stocks, by studying the company where you are going to invest.

In the field of economics and finance, an investment is an application of capital for the purpose of earning future profits. The decision to invest supposes abstaining from an immediate benefit for a future that is uncertain.

When investing, three variables must be considered: the expected return (that is, how much money is expected to be gained from the investment), the accepted risk (associated with the probabilities of obtaining the expected return) and the time horizon (when the investment will pay off; in the short, medium or long term).

With regard to foreign investment, it is the investment of capital in a foreign country, that is, in a country other than the one from which the capital comes. The notion of foreign direct investment concerns companies that wish to internationalize and establish themselves in other countries.

With the globalization process, foreign investment began to experience a period of expansion, limited in times of economic crisis . Globalization implies the free flow of capital, the lifting of customs and tax restrictions, the movement of people and goods , and other characteristics that contribute to foreign investment.

The country receiving the investment must take into account the consequences of this. On the one hand , foreign investment usually creates jobs and tax income for the receiving (host) country. But on the other hand, the gains often go back to the country of origin . Furthermore, it must be borne in mind that projects driven by foreign investment often generate environmental damage that harms the local community.

List of Acronyms Related to Investment