In the modern world, people are increasingly thinking about how to improve their material condition. For this, it is not necessary to work for many years in ordinary work. Investing is a profitable way to earn money, which requires a minimum of effort. However, it should be understood that investment is a tool that does not always work for the investor. In order not to be mistaken, you should familiarize yourself with this topic in detail.
Definition of a concept
Investments are long-term investments in the territory of the state and beyond. They are carried out with the aim of generating income, applying innovative technologies in the production process, as well as creating new and improving existing enterprises.
Investing is a great way to generate passive income. At the same time, there are a large number of investment opportunities, each of which has its own advantages and disadvantages.
The main types of investment
By types, long-term financial investments are classified as follows:
- Risky investments. Presented in the form of new shares issues that are created in areas of activity with significant risk. Investments of this type are made in projects that are not interconnected, if necessary, to obtain a quick payback of funds.
- Direct. Deposits directed to the authorized capital of entities to obtain rights to manage it and make a profit.
- Portfolio investment. It implies the formation of a portfolio, which consists of various investment values. In this case, you can purchase securities and other assets.
- Annuities. They represent investments that are profitable over specific periods of time. Mostly they are contributions to pension and insurance funds.
You should also familiarize yourself with internal and external investments.
Domestic investment
Domestic long-term financial investments are divided into the following types:
- Financial. Assume the purchase of securities of various types, as well as bank deposits on deposit accounts at interest.
- Real investments are capital investments. Money is invested in expansion of production and capital construction.
- Intelligent. Contributions of this type include professional development of specialists and creation of innovations.
External investment
Foreign investments are divided into the following types:
- Portfolio. They allow the investor to obtain the right to profit from the acquired securities of foreign companies.
- Direct. Provide the investor with the opportunity to exercise absolute control over the activities of a foreign company.
Foreign investment does not differ significantly from domestic investment. The objects of activity of this kind are negotiable and main intellectual capital values and securities.
Other types of investments
It is worth considering the following types of investments in the direction of action:
- Beginners.
- Economic investment to expand production.
- Investments for the replacement of fixed assets.
- Investments in diversification.
- Reinvestment, which involves the acquisition of new fixed assets of the company.
The need for investment mainly arises at the initial stage of creating an enterprise. Existing firms have the opportunity to invest in order to purchase equipment to expand production.Such investments are attractive because they allow you to get more profit from additional sales. You can also fund improvements to obsolete equipment. Commercial profit will be increased with significant costs aimed at promoting products on the market.
Investment planning
Investment planning involves making forecasts regarding the most effective investment in securities, natural resources, equipment, land and other assets.
For enterprise management, investment planning is quite an important task. In this case, all aspects of the economic activity of the organization should be taken into account. Treat them inflation rate taxation conditions, market development prospects, environmental conditions, the availability of material resources and the strategy of the created financial project.
Investment planning performs the following tasks:
- Determining the need for the implementation of investment resources.
- Search for methods that provide investment attraction.
- Consideration of investor relations.
- Evaluation of fees for project financing sources.
- Formation of financial calculation of investment efficiency taking into account the return of funds provided on loan.
- Development of a business plan for the project, necessary for demonstration to potential investors.
It is worth noting that one of the most important business tasks of any enterprise is a profitable investment of financial resources. Moreover, it should bring maximum profit.
Investment policy
With the help of investment policy, you can determine the priority areas for investing free capital. They will determine the growth of production, the effectiveness of entrepreneurial activity and the distribution of costs.
To date, the predominant amount of company funds has been allocated to capital construction and social infrastructure facilities. This means that resources will provide enhanced reproduction of fixed assets. These include new construction, reconstruction of existing enterprises, as well as technical re-equipment.
If the project capital investment absent, the best option would be to store cash on deposit with a reliable bank. You can also buy a controlling stake in the company with the prospect of development. Thus, it will be possible to have a direct impact on the functioning of this organization, making good profit from this.
Investments and taxes
When investing, you should find out what taxes you need to pay. It is worth noting that the income that investments bring is an object of taxation. In general, with respect to long-term financial investments, an income tax of 13% is applied. It applies to individuals who are residents of the Russian Federation. For non-payment of this tax when carrying out investment activities criminal liability is provided for, which implies imprisonment for up to three years.
Regardless of the selected financial instruments, the profit will be determined under personal income tax. However, in each case there are some nuances. An exception may be called bank deposits if their rate is lower than the discount rate of the Central Bank with the addition of five percent. However, this condition is quite rare.
Classification of investment performance indicators
To decide on the feasibility of investing in international practice, several indicators are used. They can be divided into two groups. The first includes the following indicators, which are identified on the basis of the application of the concept of discounting:
- net present value;
- discount index;
- payback period for investments, taking into account the discount rate;
- rate of return on investment;
- maximum cash outflow.
The use of the concept of discounting is not appropriate for the following indicators:
- payback period for financial investments;
- profitability index;
- Profitability data
- net profit;
- profitability index.
In order to evaluate investments correctly, you can use several methods.
Performance Assessment Methods
To determine the effectiveness of investments, various techniques and methods can be used. They can be divided into three main groups:
- Evaluation of the effectiveness of investments using the ratio of cash income to expenses.
- Investment efficiency is determined after analysis of financial statements.
- Methods that are based on the theory of the time value of money.
With the help of their application, an investment analysis of the effectiveness of projects can be carried out. Thus, an assessment and comparison of the attractiveness of investments is made, and it is also determined whether the development of investments will be. Individual objects and programs are also evaluated.
In addition, there are three types of performance evaluation:
- economic;
- financial;
- budgetary.
Economic evaluation of efficiency involves obtaining the difference between profit and expenses, without considering the definition of financial results for project participants. This option is mainly used for projects. National economy, for production groups or regions.
In the case of applying a financial assessment, the results of the project for the persons participating in it are determined. It is based on an estimated rate of return sufficient for all entities. This method does not include accounting for other consequences of investing funds.
A budget performance assessment is able to show the financial consequences of investments for various budgets. It determines the amount of investment, as well as the estimated ratio of costs, taxes and fees. Indicators of this type represent the difference between taxes and expenses for a particular budget level, which depends on the implemented project.
Investment analysis methods are implemented depending on the type of assessment. Traditional methods can be combined with those based on the concept of discounting. In the first case, the calculation of such indicators as the rate of return and payback period of investments is performed.
ROI calculation
When attracting investments, it is necessary to calculate their profitability. This is especially important for investors who are considering a large number of projects. Whether they will be profitable, you can find out using a special formula. It involves calculating the ROI, which is a return on investment ratio. To do this, you need to get the difference between the sales and acquisition costs, divide the resulting number by the acquisition price, adding the profit margin and multiplying by 100%.
The calculation of profitability allows you to determine the return on investment at the stage of consideration of the project. You should also pay attention to the investments of the year, which attracted a large number of companies, individuals and legal entities willing to invest available funds. They are able to make a person financially independent. However, do not forget that investment is a tool that does not always bring profit. In order to avoid loss of funds, it is necessary to take seriously the issue of choosing a project.
