Putting money into a new factory, a college degree, or a stock portfolio all count as investment, but not in the way a stockbroker uses the word. Economists mean spending today that is expected to produce benefits later. Buying shares on the secondary market is not investment in this sense; it is just a transfer between owners. The company already got its money when it issued the shares.

Real investment takes three main forms. Businesses buy machinery, build factories, and develop software. Households buy homes and pay for education. Governments build roads, ports, and schools. Each type adds to the capital stock, the total stock of productive assets a country owns. A country that invests steadily tends to grow faster than one that does not.

Investment is risky. The returns come years later and may never materialize. A restaurant that borrows to expand may find the neighborhood changed. A firm that bets on a new technology may lose to a competitor. That uncertainty is why investment falls sharply during recessions. Businesses wait for clearer skies before committing capital, and the delay deepens the downturn.

Investment categories

• Business fixed investment: machinery, buildings, software
• Residential investment: housing construction
• Inventory investment: goods held for future sale
• Human capital: education and training
• Public investment: infrastructure and research