What Is Capital Investment: How it Works, Types, Example

By Motley Fool Staff – Updated Jun 12, 2025 at 11:45 PM

Key Points

Capital investments fund long-term assets crucial for business operations and growth.
High capital investment often indicates a robust economy; low investment may signal economic concern.
Investors should analyze capital investment trends as a core part of investment research.

Virtually every business needs to make capital investments. Some need land; others require machinery. Even virtual companies that only do online business make a capital investment when they buy computers. We'll explain capital investments in this article, including their uses, their importance, and the types of businesses that rely most heavily on capital investments.

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Robots in an assembly line in a factory, appearing the way that human workers normally do. — Image source: Getty Images.

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Because capital investment is such an integral part of economic performance, federal agencies keep close tabs on it. The Federal Reserve Board, for example, tracks investment with 36 asset categories:

30 for equipment.
Five for buildings.
One for software.

The Bureau of Labor Statistics tracks capital services -- benefits from the deployment of capital investments -- to measure productivity, another key economic barometer. The Energy Information Administration keeps an eye on quarterly capital spending by 40 publicly traded U.S. oil exploration and production companies.

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