Investments: their types and forms

If you are not satisfied with the current standard of living, then you need to work hard to improve the current situation. You can start by investing your own time in self-education. Then, being better prepared, it is better to earn. And if there is a desire to turn around in a big way, then you can pay attention to investment.

Introductory information

What are they? Investments - this is the implementation of investments in a specific project, enterprise, organization in order to make a profit and increase their savings. Depending on the risk, profitability and a number of other signs, various investments and their types are distinguished. Depending on the initial point of view, a different number of them is distinguished. We can distinguish the types of investments in fixed assets, financial instruments, and so on. Much depends on the goals pursued.

Role in the country's economy

Speaking about what types of investments exist, it should be noted that there can be quite a lot of classifications. Depending on what is of interest, the situation may change dramatically. So, if we talk about the role in the country's economy, then there are 2 types of investments:

1. Gross. By this is meant the entire amount of monetary resources that have been allocated over a certain period for the growth of fixed capital, as well as inventories.
2. Clean. The same as in paragraph 1, but with the deduction of depreciation. The growth dynamics of this indicator allows us to judge the nature and direction of development of the state economy at this stage. In cases where the volume of gross investment becomes less than depreciation, it acquires a negative value.

What is the difference between these types of investments? Investments characterize the state’s potential and reflect future growth / decline in output. How exactly? For example, if gross investment is equal to the amount of depreciation, this indicates that there is no economic growth and depression is observed in the country. If investments exceed the level of requests, we can confidently say that there is a rise in the economic sector, which allows for expanded reproduction of working and fixed capital. At the same time, what objects are most popular for investments plays a major role: real and financial. This also allows us to judge the success of the state economy.

About investment objects

So, here we distinguish between such investments and their types:

1. The real ones. Also known as capital investment. They are investments in non / tangible assets and are aimed at creating real values ​​(that is, they are targeted). What are they? Material investments are investments that are associated with the creation or acquisition of fixed capital. They are carried out, as a rule, as part of the project. Both own and borrowed (attracted) funds can be used. Intangible (they are potential) investments are made in the benefits that give certain prospects in the distant future. As an example, we can carry out research and development work, training and professional development of personnel, the development of industrial designs of new products and so on. That is, the end result is an increase in the level of skills and knowledge of specialists or the entire potential in comparison with other similar entities.
2. Financial. They are capital investments in assets. But not all, but only in long- and short-term financial investments in which certain instruments are used (bonds, stocks, business certificates, bills of exchange).They can also be directed to the authorized capital, issued as a loan and so on. Often referred to as portfolio investments. And there is a reason for this. The fact is that often the investor’s priority goal is the formation of an optimal set of financial assets and their subsequent management. He is called a portfolio. Although it should be noted that between these concepts can not put the equal sign. Portfolio investments should be considered as part of financial. After all, they are associated only with the securities of various issuers. Whereas the concept of financial investment is broader. Their feature is very high mobility. That is, financial capital can quickly move to the stock market of the country where it is profitable to acquire assets. When the situation worsens, he also quickly leaves and moves. An example is the situation in the Russian Federation that occurred after the August 1998 crisis. Then, investors very quickly withdrew capital invested in securities.

About the nature and timing

The value of the types of investments of this type is slightly less than those that were considered earlier, but they allow us to judge the potential future for the country. If we choose the nature of investments as a reference point, then we should highlight:

1. Direct investments. They involve the direct participation of stakeholders in the process. That is, the investor decides where to invest the available funds. And the services of intermediaries are not needed.
2. Indirect investment. Implemented through intermediaries. For example, investment funds, banks, insurance companies and so on. Moreover, intermediaries pursue a policy of accumulation and placement at their discretion. They solve issues based on their own orientations. As a rule, presented in the form of investments in securities.

Speaking about the types of investments and investments, one cannot ignore the time frame for which they are carried out. There is no single accepted system. Some emit only short and long-term. Others add medium-term ones to them. The period that must be met in order to be assigned to a specific group also varies. Consider the most complete classification:

1. Short-term investments. These are funds aimed at maintaining the current situation or in projects with a short period of work. These investments have a term of up to one year. Often they have a high risk, which is offset by profitability. As an example: a company needs to buy materials to launch a new plant, whose products already have orders.
2. Medium-term investments. Carried out in securities. They are involved in cases when the company needs additional injections to turn more active activities. Their term ranges from one to five years. As an example: ordinary and preferred shares, mortgages, addition of funds to special funds.
3. Long-term investments. These are funds that are allocated for a considerable time, but potentially promising significant profits. They are involved for a period of five years. An example is the following situation: in 1900, people could buy US bonds for a century. And in 2000, for one dollar invested, get as much as 10 thousand. It was very risky, but those who decided to invest did not regret it.

On the form of ownership, nature of use and territorial origin

You can write a whole book about investments and their types - their diversity is so great. If we talk about forms of ownership, then distinguish:

1. Private investment. They mean the investment of citizens and legal entities on which the government has no influence.
2. Government investment. This means investing in enterprises that the government can influence, as well as from the federal, regional and local budgets.

If you touch on the nature of the use that takes place in the economy, the types of investments will be as follows:

1. Primary investments. This is an investment in business entities, which are carried out thanks to external and internal sources.
2. Reinvestment. This is the secondary use of capital. It is implemented at the expense of previously implemented projects, as well as the sale of inefficient financial instruments.
3. Deinvestment It implies the withdrawal of previously invested funds from stock instruments and projects without further direction in the form of investments.

Speaking about investments and their types, one cannot ignore the factor of the territory. Depending on it, they distinguish:

1. Domestic (domestic) investments. This is the capital that was invested by residents of the country. By them can be meant both organizations and individuals. The value of this parameter indicates a strong domestic market.
2. Foreign (external) investments. These include capital investments made by non-residents of the country. The value of this parameter indicates the country's attractiveness in the world market.

What about the risk?

There is always a chance to lose your investment. If we talk about risk, then there are 4 types of investments:

1. Risk-free investments. This is an investment where minimal profit is almost guaranteed. Losses are not expected here. As a rule, they have minimal profitability.
2. Low risk investments. This is an investment of available funds in such facilities where the probability of losing money is less than the average market. As a rule, they have low profitability.
3. Mid-risk investments. This is an investment of available capital in such facilities where the probability of losing money approximately corresponds to the average for the market. As a rule, they have an average yield.
4. High-risk investments. They are characterized by a high probability of loss of funds. But this is offset by significant expected gains. Separately, among them are the so-called "speculative" investments). By them is meant the investment of capital in the most dangerous assets, which can bring huge profits (or, more often, go broke and give nothing).

Therefore, very often strategic and portfolio investments are also singled out. Such a classification division is carried out depending on the objectives pursued and the degree of connection with the investment process:

1. Strategic investments. In this case, the goal is to acquire a company or a large share in its authorized capital in order to really manage business. They are also carried out as part of the mergers and acquisitions strategies of other organizations.
2. Portfolio investment. They suggest investing money to obtain an acceptable current income (in the form of dividends) or a capital gain in the future.

Alternative Risk Consideration

In addition to the classification already considered, there is another one:

1. Conservative investment. This designation is used for investments that focus on low-risk assets. At the same time, investment objects are characterized by liquidity and reliability. An example is government loan bonds. The chance that a default will be declared in a certain territory is minimal.

2. Moderate investment. Their peculiarity is the average level of risk, together with a sufficiently high liquidity and profitability from perfect investments.

3. Aggressive investment. They are characterized by a very high risk. Investments of this type have low liquidity, but can bring high returns.

What are the more desirable types of investments? Should the investment project be conservative, moderate or aggressive? Everyone is looking for answers to these questions on their own.

How are they attracted?

So we considered the main points about the types and forms. But that is far from all.After all, the question of what types of investment attraction exist is still relevant. And in short, this:

1. Initial public offering. It involves the assessment of the company by independent auditors who study the state of affairs (profitability, stability, organization), that is, everything that affects the enterprise. Then, based on their conclusion, the organization enters the stock market and begins for the first time to sell its securities (stocks).
2. Attraction of credit funds. In this case, an appeal is made to financial institutions (banks) so that they approve loans. This option is considered as relatively loyal and at the same time simple in terms of achieving the ultimate goal (obtaining funds).
3. Issue of bonds, bills, certificates, secondary transfer of shares and other similar instruments. In this case, it is assumed that certain securities are issued that require specific conditions. They are used to form portfolio investments. The most attention is given to stocks and bonds, while other instruments are more specific, so they are given less attention. Portfolio investments are made in the form of transferring part of the funds in exchange for ownership. It should be noted that securities give different status and privileges, therefore, all these nuances must be carefully studied.
4. Work with investors directly. It involves direct negotiations with those who have free cash. These types of private investments allow developing the most flexible working conditions and ensuring the formation of the most profitable cooperation.

From a position of global interaction

We can also distinguish the types of international investment. Among them are distinguished:

1. Direct investments. They are the main form of export of entrepreneurial capital. Direct investments are most preferred for countries. But for investors, they are the most dangerous. Indeed, due to low liquidity, there is no way to quickly leave the country.
2. Portfolio attachments. This type of investment is made through international and national stock markets. It should be remembered that in this case control over the company is not ensured and all that an investor can get is a share of profit.
3. Credit investments. Behind this phrase are loans from foreign banks, governments of individual states, international corporations and financial organizations, as well as private individuals (when working with projects). A distinctive feature of this type of investment is their long-term nature and focus on real assets.

Opinions of specialists about the variety of forms

Often one may come across thoughts that many identifications are incomplete and / or closely intertwined. For example, portfolio investments often mean buying securities on their secondary market. But they can be formed thanks to the initial offer! After all, securities are issued primarily to attract investor funds in production. In addition, various forms of investment may be mixed due to the lack of strict criteria for their distribution. That is, it is also necessary to focus on the objects of investment themselves, and on the goals pursued.

Conclusion

It is difficult to underestimate the role played by the types of investment discussed above in the economy. From whatever point of view they are looked at, they are useful, because they allow you to activate the movement of capital and contribute to the development of the economic sector of the state. In addition, such movements allow you to start the process of equalizing the situation between different countries. An example is southeast Asia, which for sixty years was the backwater of the third world, and now there are many prosperous states, the standard of living in which you can only envy.How much their economy soared! Types of investments are not important when they work in the interests of all people.