Investment differs from arbitrage, in which profit is generated without investing capital or bearing risk. Diversification has the statistical effect of reducing overall risk.Īn investor may bear a risk of loss of some or all of their capital invested. Investors, particularly novices, are often advised to diversify their portfolio. Similarly, high risk comes with a chance of high losses. When a low-risk investment is made, the return is also generally low. Investors generally expect higher returns from riskier investments. The return may also include currency gains or losses due to changes in the foreign currency exchange rates. The return may consist of a gain (profit) or a loss realized from the sale of a property or an investment, unrealized capital appreciation (or depreciation), or investment income such as dividends, interest, or rental income, or a combination of capital gain and income.

In finance, the purpose of investing is to generate a return from the invested asset. Investment science is the application of scientific tools (usually mathematical) for investments. When expenditure and receipts are defined in terms of money, then the net monetary receipt in a time period is termed as cash flow, while money received in a series of several time periods is termed as cash flow stream. From a broader viewpoint, an investment can be defined as 'to tailor the pattern of expenditure and receipt of resources to optimise the desirable patterns of these flows'. If an investment involves money, then it can be defined as a 'commitment of money to receive more money later'. Investment is traditionally defined as the 'commitment of resources to achieve later benefits'. JSTOR ( February 2017) ( Learn how and when to remove this template message).Unsourced material may be challenged and removed. Please help improve this article by adding citations to reliable sources. This article needs additional citations for verification.

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