What is Investment Recovery?

Often referred to as asset recovery, investment recovery is a working strategy aimed at managing current assets in a manner that makes it possible to recover as much of the original capital investment as possible. The term is utilized in a number of investing and business settings. In all applications, the goal is to offset the original investment as much as possible.

In terms of business operations, investment recovery is a key component of dealing with the obsolescence of older manufacturing equipment. As machinery and other production components are replaced with newer and more efficient devices, there is a need to recoup some of the original cost of the older machinery. This is often accomplished by selling the replaced equipment at pricing as close to the original purchase price as possible. Doing so allows the company to increase the overall gains or profits that were generated by the equipment during the years the devices were in active use.

In terms of making investments, investment recovery is the practical consideration of recouping the original cost of purchasing stocks, bonds, or commodities. Since the aim of any investment activity is to increase the overall value of the financial portfolio, it is important to select options that are likely to increase in value over time. Should a particular investment fail to perform as anticipated, the investor may find it necessary to sell the option. When that is the case, the goal is to sell the option for at least as much as the original purchase price per unit. This makes it possible for the investor to at least recover his or her original outlay of capital, thus preventing a loss to the value of the investment portfolio.

The concept of investment recovery can be applied to finances of any type. Along with playing the stock market or purchasing operating equipment, the idea also applies to retirement fund management. Many retirement funds are grown through the process of investing in various financial markets. Managers seek to manage the amount of capital placed into a 401(k) or other pension fund so that all contributions are invested wisely. This helps to ensure that the value of the fund never falls below the level of the total number of contributions. Just as any investor would attempt to recoup the original capital used to secure an investment, fund administrators would do the same with any investment made with the capital assigned to a retirement plan.

One of the functions of a financial advisor is to assist clients in arranging their investment activities so that they always realize investment recovery. This usually takes place by counseling a client to sell an asset before it drops in value, or to avoid acquiring a given asset that will not likely resell for at least the same unit price.