Each of us dreams of passive income. Its essence lies in the fact that almost without any effort money comes to the bank account. How is this possible? It's all about investments. If earlier only a few could afford such a type of earnings, then in the 21st century, very many profit so. But first, let's look at what types of investments exist, what are their features. Agree, investing personal funds without understanding how it works would be stupid.
Some general useful information
To get started, let's try to figure out the term, and only then we'll talk about the species. An investment is an investment of one’s own or borrowed funds in order to make a profit after a certain period of time. Most often, the object in which the funds are invested is entrepreneurial activity. It is safe to say that for a beginner, the concept and types of investments are a dense forest. This is due to the fact that there is a multilevel classification. You must familiarize yourself with it before you invest your money somewhere for the first time.
I would like to immediately note that investing is almost always a high risk. Whoever says anything about guarantees, it is simply impossible to predict the further course of events. Of course, there are short-term forecasts, for example, a day or a week in advance, but this still does not mean anything. In order not to throw their money away, a special contract is drawn up before their investment. The document is notarized.
Its essence lies in the fact that, for example, having invested 100,000 rubles, in the worst case scenario you will receive this amount in any case, as well as a forfeit, the size of which is determined in advance. But, as practice shows, this does not always work. An entrepreneur may disappear with money. We all probably heard about the so-called financial pyramids, and we know how they work. This is exactly the case when many were unable to return their contributions. Let's look at the main types and forms of investment. There are quite a lot of them, but we will try to touch upon everything that may be important.
Investing in domestic production and abroad
Nowadays, almost anyone can invest wherever he wants. Since more favorable conditions are created for investing abroad, the majority of Russian citizens who can afford it take money abroad.
Let's look at what types of foreign investments exist:
- Real - a contribution of money for the purpose of acquiring a production facility. As a rule, it is long-term.
- There is still financial investment, the essence of which is the contribution to securities. By and large, this is the purchase of property abroad.
- Of course, you can not do without intangible investments. These include the purchase of copyrights, patents, etc.
Of course, there are other types of foreign investment, but they are less common than the above.
As for deposits within the country, this is a separate conversation. You can invest in your region or country without any problems. It can be securities, entrepreneurship and much more. The latter kind is more preferable. This is due to the fact that there are a lot of proposals, and the investor himself is free to choose with whom to cooperate and with whom not. We continue to consider the issue further, because we still have something to talk about.
Classification of contributions by nature of participation
Direct investments - these are those in which the investor himself is directly involved in the selection of a certain number of investment objects. This term can be understood as an investment in authorized capital.
As for world practice, direct investments are considered to be only those that make up twenty-five or more percent of the company's charter. In fact, this is a very large amount of money. There are the following types of direct investments: outgoing and incoming. The first group is when a Russian invests in companies abroad, and the second when in domestic organizations.
There are also indirect investments. Their feature is that the owner of the invested capital does not independently select the object. Investment consultants, special funds or companies do this for him. The indicated method can be considered less risky than the one described above, since the investment object is chosen by professionals for you, therefore, the chance to make a mistake is somewhat less. By and large, this is trust management. But it is worth paying attention to the fact that indirect deposits as the main types of investments have rather low returns. According to statistics, this is how most small and medium-sized investors earn today. This method is especially relevant for beginners.
Investments by economic activity
This point is of interest to many investors. It should be noted right away that any investment you made will be one way or another attributed to economic activity. If you helped a start-up entrepreneur open a small business, then you also invested in the economy.
Let's look at what brings the most income in Russia. For a long time construction has been a leader, an industry in which huge sums of money are invested annually. In some cases, the yield can be 55-56% per month. If you compare with water or air transport, where profits fluctuate within 1%, then these are enormous numbers. In second place are agriculture, forestry and fisheries, as well as services related to this activity. Here the income is about 6.2% per month.
But since there are various types of investments in the economy, it is not so simple as it might seem at first glance. Firstly, it is not easy to occupy a profitable niche. In order to do this, you need to invest a large amount of money for the long term. Secondly, never forget that you are at risk. That is why it is recommended to draw up an agreement according to which, in any case, you will receive an initial deposit amount as a return. So the profit will be slightly less, but the risk is not so great. For example, unfavorable conditions for the development of small business in Russia lead to the fact that young entrepreneurs close their stores without having time to open them, and all this even with a sponsor.
Popular types of financial investments
By investment, it is necessary to understand investments in any financial objects, for example, in securities. Today, there are four relevant types of financial investments, let's look at each of them.
- Long term loan - This is a capital contribution that will be used to ensure the life of the fixed assets of the invested company. This species is very developed abroad; in Russia, due to the high interest rate, many people bypass it.
- Bank loan - The optimal solution for small businesses with a short payback period. The interest rate is set by the bank and depends on the type of loan.
- Is there some more stocks and bods market. It is almost the main and most important type of financial investment. The bottom line is moving securities around a company, factory, or any other organization.In this way, research and public programs are funded.
- Well, the last is capital contribution to subsidiaries. The main advantage of this type is its high profitability with relatively small investments. The investor also has the opportunity to indirectly influence the management of the organization.
So we examined the types and forms of investment that involve investing in financial objects.
Classification according to investment objects
Real investments, about which we have already talked a little, are divided into several groups, each of which we will now consider. Investments in own production in order to increase efficiency are needed, as a rule, to replace old equipment with more productive one.
Also, to improve the fixed assets of the enterprise and increase production capacity, this type of investment is used. The so-called extensive contributions are widespread, which are aimed at expanding the existing organization. But in practice, more often than not, we are faced with investing in new production, although reconstruction of the old one may also be carried out. In Russia, this is one of the most popular means of investing capital for the long term.
The most promising in terms of profit are financial portfolios. This is an investment in the above financial instruments. The latter can be gems, stocks, currency, etc. As for the term “portfolio”, these are various contributions put together.
Regardless of their diversity, the essence of such investments is to achieve a common goal - making a profit. As a rule, in order to achieve the expected results, it is better to seek the help of funds or managers who have experience in this field. The undeniable advantage of the portfolio is that if the investment, for example, in precious stones, burns out, then everything else will stay afloat and will make a profit.
Profitability and risk of investments
We have examined the types of investment structures. Now I would like to say a few words about the profitability and risk of investments. Highly profitable investments come first. As the name implies, these investments are characterized by the fact that the investor receives a substantial profit, which significantly exceeds the average in the investment market. There are still low-yield deposits that do not bring substantial profit to the investor. In addition, there are middle-income investments. How to make the right choice and determine which species is more suitable for you? To do this, talk about risk, which plays an important role.
There are risk-free investments that completely eliminate the loss of invested funds. Therefore, even in the worst case scenario, you will receive a net investment income. Low-risk deposits are characterized by the fact that the possibility of losing funds is slightly lower than the average for the market. Most inexperienced investors start at this level. There are also medium and high risk deposits. The latter involve investing in the most unstable projects. If they do not burn out, then the profit will be significant even with small investments.
About liquidity and terms
If we consider the main types of investments of the enterprise, then just can not help but mention that there is such a term as liquidity, and restrictions in the form of terms. The latter are of three types:
- short-term - investing money for a period of not more than 12 months;
- medium-term - the contribution of money, starting from one year and ending with five;
- Long-term - investment duration exceeds 5 years.
In Russia, a certain trend can be traced, according to which the majority prefers the first type in order to profit as soon as possible. But in practice, long-term investments give better results, albeit for a longer period of time.
Liquidity characterizes the speed of converting assets into real currency at a price that is close to market. That is why it is recommended to invest only in highly liquid projects. Unfortunately, this is often impossible for many reasons, so it makes sense to give preference to medium-liquid plans, according to which assets are converted in a period of one to six months with virtually no loss in price. There are still illiquid investments that in no way can be realized independently. For conversion into real money, deposits should only be part of the property complex.
What else you need to know about investments
I would like to say a few words about the bank deposit. Such investments are good because you can be 99% sure that the funds will not be lost. The profitability of bank deposits depends on the amount of the deposit and the duration. The more these indicators, the higher the final profit. It is worth noting that the availability of the possibility of replenishment of the deposit slightly reduces the percentage, so the amount at the exit may be lower than expected.
There are several undeniable advantages of a bank deposit, which are low risks and the ability to invest not too large amounts of money.
After we examined the concept and types of investments, we can say that such a method is bad because it brings a relatively small profit, and liquidity is not at the best level. If you want to withdraw funds before the prescribed deadline, you may lose profits.
It is impossible not to say about investments on the Forex exchange. Of course, this is not a good idea for beginners, but for those who are well versed in the trends in exchange rates, etc., this is a good place to invest. It is noteworthy that on the stock exchange you can start with $ 100 and rise significantly.
Conclusion
We examined in the article the nature and types of investments. As a contributor, you now know what to give preference to and what to look for. If you want to make a profit with absolute probability, then do not give preference to high-risk investments. If you are willing to take risks for a good profit, then this option is just for you.
As for the sphere in which it is preferable to invest, it is construction, agriculture, etc. Do not forget the following: investing in state-owned companies of your native country, you are developing its economy. If you prefer to invest abroad, then remember the high competition.
Although the conditions on the investment market abroad are more favorable, developing there is somewhat more difficult, and with a small amount it is hardly necessary to do this at all. Of course, a big role is played by how much you will choose the right niche for earning. If the competition in the sphere is not so great, then the chances of success are above average.
That's all that can be said about what contributions are, what is their essence. And we also considered the types of investments, the most popular today, so there should not be any questions. Remember that it is not necessary to start with a large amount, sometimes a hundred dollars is enough to start successfully. Of course, at first you will not earn much, but over time, income will increase.
