DO YOU HAVE ANY IDEA ABOUT
INVESTMENT AND SAVINGS?Before commenting any thing on this topic, simply we will have to understand
first of all,what is
investment and then investment
activity and after thatabout savings. **What is Investment? - it means many things to many persons- a> if one person has advanced some money to another, it may be his loan which may be considered his investment for a return. b> if a person has purchased on kg of gold for the purpose of price appreciation or aconsumerdurables like a washing machine for the flow of services, it is his investment. c> if a person purchases an insurance plan or a pension plan, it is an investment. d> for the individuals, it is the exchange of the money or cash for a future claim on money. e> for the issuer of securities , it is the use of money for fixed capital equipments, working capitalor any other productive or unproductive activity. **What is Investment Activity? - Basically, investment activity includes buying and selling or trading in the above claims on money and /or promissory notes.There are two terms which are relevant for thiscontext –a> Gross investment - i.e. total investments made from all sources by an economy or a single economic unit. b> Net investment - i.e.simply gross investment minus disinvestments for an economic unit. Net Investment =Gross Assets+ Investments - Depreciation. **Why do people save? - As we know very well that bulk of the savings come forspecific objectives like - 1> interest income 2> future needs 3>contingencies 4> precautionary purpose 5> growth in future wealth 6> rise in the standard of living. **How do savings emerge? - Savings are excess of income over expenditure for any economic unit.Thus, S = Y-E where, S=savings, Y=income and E=expenditure. - Investment is also made by many company's and individuals by borrowing from others.Thus,I personally believe that after going through this you will be able to understand basics of investment. Rest in the next topic. (ANANT DAAS)