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An investment is the purchase of a financial instrument (such as stocks, bonds and bank products) or an asset with the purpose of producing income for the purchaser through profit or generating more business in the future. 

Sometimes a company decides to invest in another company with the purpose of influencing that company’s policies and activities. Common types of company investment are as follows:

  • Passive investments in debt and equity securities: Passive investments are made to earn a return on funds that may be needed for future short- term or long-term purposes.
  • Investments in stock for significant influence: Significant influence refers to the ability to have a significant impact on another company's operating, investing, and financing policies. If the investing business holds 20% to 50% of the other company's outstanding voting shares, significant influence is assumed.
  • Investments in stock for control: Control refers to the capacity to influence a company's running and financial policies through voting stock ownership. Control is presumed when the investing business holds more than 50% of the other company's outstanding voting shares.

[Last updated in March of 2022 by the Wex Definitions Team]