The essence of investments is to invest capital (material or non-material form) in various investment projects, securities, funds in order to make a profit in the future. Very often, some types of investments are compared with speculation, however, these are two different concepts. After all, speculative projects involve investing money for up to one year (most often for a month or two). All investments for more than a year are already investments. But there are types of investments that fall under these two definitions, such as operations on stock exchanges. They are mostly short-term in nature, but they are not called speculation. You can consider in more detail the main types of investments.
This type of investment differs from others in that money is invested here in real things: enterprises, privatized objects, real estate. According to the classification, real investments are:
Keep in mind that such investments are considered risky and therefore require professional management. Before deciding on investments, for example, in a specific production, it is recommended to get the opportunity to influence the company management, and it is best to own the main rate of shares. There are cases when the views of the company management and the investor on the methods of distribution of investment funds did not coincide. As a result, conflict situations arose. Good management presupposes continuous market analysis, search for consensus between stakeholders, and forecasting of future results.
Unlike the national currency, the rate of which can be up and down, objects of real investment are rarely devalued. For example, an investor bought an apartment in order to rent it out, and it only grows in price on the background of general inflation. The level of profitability of such investments is quite high. This is not a fixed interest in the bank, as is the case with a deposit, but an opportunity to earn much more. After all, by expanding production, modernizing, and improving the qualifications of personnel, you can get more quality products, and therefore more money.
But there are also certain risks of this type of investment:
In the latter case, financial instruments look more attractive. They can be easily sold on any exchange. But it is the real investments that allow the business to develop, to act more broadly and effectively.
For individuals, real investment is a procedure that does not require registration of a large number of papers (with the exception of investing in opening their own company):
This type of investment is considered the most popular and widespread. Financial investment is a process when an investor uses various investment tools in order to get a profit. In addition, a similar method is used to diversify risks, gain control over the issuing company, and preserve capital. The qualities of financial investments are:
Of course, there are risks of a decrease in profitability and loss of investment capital, but this is possible in any type of investment.
The structure of financial investments is distributed by markets:
Stocks are considered the most highly profitable, but also risky instrument. Bonds are usually secured by the government and are less risky, but also less profitable. Mutual investment funds are considered to be something between the two previous investment instruments, because in this case the investors’ money is managed by professionals, which reduces the risk of losses. Financial investments also include investments in precious metals, futures, options, forwards, depositary receipts.
How financial investments are valued:
If we take into account all the results obtained, then you can choose the most suitable financial investment instrument. Keep in mind that in addition to getting a profit, this type of investment allows companies to increase their influence on the current market segment. Economists recommend forming an investment portfolio from different types of financial investment assets. These can be, for example, purchases of shares, deposits and currency. If the bank goes bankrupt, there will still be stocks and currency.
This type of investment involves investing in intellectual products. Intellectual property can be private or collective. Objects for investment are:
Investments can be technological, technical or artistic. The latter, for example, includes a previously unused design solution for a trademark or logo, technical – improvement of equipment, mechanisms and instruments. Buying innovative software is also an investment of money.
This type of investment is considered promising today, but it also carries a lot of risks. After all, no one can guarantee that the acquired technology, for example, will be successful in production. However, the rapid development of the market simply forces us to look for new projects and ways to improve the business, so investments in intellectual property are very relevant. The creation of special exchanges that trade ip-assets only confirms this fact. Intellectual investments are capable of making a “breakthrough” in the production sphere with average financial investments. Such investments have a beneficial effect on the entire economy of the country as a whole.
The conservative type of portfolio investment involves investing in bonds and government stocks. There is no need to wait for special income, however, the risks are minimized. Diversified investments are based on the division of the degree of risk between different financial investment instruments, where the high profitability of some is insured by the reliability of others. The profitability of such a portfolio is equal to the average market indicator.
A conservative approach is inherent in risk-averse investors. A moderate investment strategy involves the use of an equal share of risk-free and highly profitable “dangerous” investments with high liquidity. Aggressive investment portfolio management aims to get as much income as possible. But in this case, the risks are very high, because the portfolio is formed from the shares of “green” companies that have not yet gained authority in the market, but are rapidly developing from new startups, as well.
Tags: finance, investment