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The movement of money for investing, trade or business production, whether by a corporation, a government or an individual, is commonly referred to as capital flows.

A corporation’s investment capital, plus its spending on operations and research and development comprise its capital flows.

The tax revenue a government directs into its programs is its capital flows, as is the money it spends and collects through trade with other nations. A positive capital flow means a nation is receiving more money from foreign sources than it’s paying to invest in foreign sources.

Individual investors put their capital flows into securities like stocks, bonds and mutual funds.

The U.S. government and other organizations study different types of capital flows. Specific areas include:

  • Asset-class movements, which analyzes the flow of capital between stocks, bonds and other investments.
  • Venture capital, which looks at investments in start-up businesses.
  • Mutual fund flows, which is the net additions or withdrawals from broad classes of funds.
  • Capital-spending budgets that examine corporate growth.
  • And the federal budget, which reviews government spending.

Capital flows reveal the strength of capital markets, especially the stock market and the federal budget. Investors study the growth rates of capital flows to find investment opportunities and risks.

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