Putting the Capital in Capital Markets

The financial industry plays a vital function based on a pretty simple process - transfer money from those who have it (suppliers of capital) to those who don't have it (me aka users of capital).

But what is Capital?

Capital refers to something that has economic value. That can be real value, such as owning land or a building and, can also be representational value, such as money, stocks and bonds.

But really, in most day to day uses of the word, capital refers to money, however, a key characteristic of capital is how it is used. While most people consider capital to be simply money, a more accurate description of capital is cash that is being put to work for investment purposes (using that money to make more money).

For example, if an investment manager says they’re “deploying capital”, they’re spending/investing money.

TL;DR Capital is money used to make more money.