Investments are such funds that you can invest in a seemingly profitable event, so that in the future you can get profit through this. Economics as a science examines in detail the concept and types of investments. It is customary to include here not only banknotes directly, but also securities and rights that can be valued in monetary terms. In addition to profit, investments can be a source of other beneficial effects.
Where do the roots come from?
As the main sources of investment, it is necessary to allocate the funds that the entrepreneur receives by implementing the project. In addition, the investment involves taking into account the money received in the organization from the outside.
External sources of investment, their types, main areas:
- Investor money from which equity is formed.
- Subsidies provided free of charge to a business entity from foundations, organizations, individuals. This includes the flow of foreign investment by type.
- Debt obligations involving loans, loans subject to repayment within a strictly specified time period subject to the observance of key conditions.
- Property transferred to the enterprise on the basis of leasing, leasing, and subject to return on the terms declared by the contract.
Solidity is the key to success
If the type of investment does not include a small, insignificant investment that does not play a role for the enterprise as a whole (say, a calculator presented by friends), then capital investments must be clearly taken into account, since they are investments in fixed assets.
It would be reasonable to use such money for the construction of new facilities, the reconstruction of existing ones, as well as for updating the technical park of the enterprise. They spend money on equipment, tools, surveying, creating projects and other large-scale events that allow the company to develop confidently taking into account the standards of the present and predicted future. These types of investments are critical to a successful business.
Additionally, the so-called capital-forming investments are distinguished. This is the main type of investment coming into the Russian Federation to create a project. Of these, money is allocated for working capital and other aspects necessary for the successful implementation of the enterprise. This type of investment is a capital investment.
Investing as a job
For a person who has money, it is important not only to know what investments are, types of investments, classification of investments, but also to be able to correctly apply the data in practical activities. This involves investing in existing or planned enterprises and is called investing.
If investment aims to create, support fixed assets, then it involves working with capital-forming investments. The sources for the project are investors. Also in the process are actively involved customers and contractors, users, suppliers. Often involved individuals, legal entities: domestic and foreign. In a fairly large project, the investment component is implemented at the state level or internationally.
Classification is not an easy task
The system of dividing investments into types and types is quite complex and is designed to take into account numerous factors. Different economists suggest different systems for dividing into groups. The most common classification option involves taking into account the following aspects:
- object (money, intangible assets, property);
- direction of action (development, optimization, expansion, diversification);
- field of activity (development, promotion, acquisition, human resources, management systems).
It is allowed to distinguish other characteristics for division into groups. So, they talk about the types of investments: small, large; dependent, independent.
We invest in property
These are the types of foreign investments, domestic, which are involved in the production process. Money is allocated for the purchase and modernization of equipment and equipment, and is used to create stocks of components and consumables. Such investments are directed to the creation and maintenance of structures, buildings.
Property investments are known as real, production. With their help, the company can grow and develop, increase the capacity of workshops, and improve the quality of the manufactured product. Often, investment is aimed at expanding the line of production positions. In some cases, finances are aimed at optimizing the workflow in order to reduce the fatigue of a human resource.
Investments and money
Financial investments - this is the type that suggests that the investor is invested precisely in the financial component of the enterprise. In particular, he can buy debt rights or invest in rights that allow him to participate in the affairs of a company. This is realized through securities, assets in banks, and loans.
If you purchase bonds, stocks, you can influence the activities of various enterprises. The same power is obtained by investors who already at the stage of creating the organization contribute a certain amount to its authorized capital or participate in the project on the basis of shared financing. There are several other mechanisms for investing in entrepreneurship, more or less common in the modern investment market.
Investments: Intangible Assets
These should include money invested in the training and attraction of highly qualified personnel. This includes funds aimed at improving, research, marketing and promotion of goods in the domestic and foreign market.
Allocate potential intangible investments. Those suggest investing in the future, that is, with an analysis of the prospects for market development. A distinctive feature of potential and real investments of this type is the difficulty in correlating investments and results. It’s easy to evaluate how much money is invested, but the effectiveness is usually not obvious and does not have a financial indicator, which complicates the analysis of the effectiveness of investing in a project.
Investments: what and where?
Money can be directed to various goals and objectives. Depending on the purpose of a particular investment, they speak of their belonging to a specific group. Allocate:
- On the basis of the company, involving the investment of money at the time of the acquisition of the company or laying the foundations of a new enterprise.
- To expand the capabilities due to which they increase production capacities, weak points in divisions are eliminated.
- For changes that allow changing obsolete objects to new ones. Those are called reimbursable. A classic application for this type of investment is the replacement of machines with new ones that have similar parameters.
- For optimization, involving the improvement of equipment, workflow, due to which expenses in the course of work are reduced, productivity is increased. A typical example: the machine is changed to a more advanced automatic, distinguished by productivity.
Strategy and Tactics
It is customary to say that investing is a strategic task. With the right approach, you can ensure a reliable, prosperous future for the company.At the same time, investment decisions should be comprehensive and cover all areas of the company’s activity - from financing, taxes and the promotion of goods and brands as such to the production process at the lowest level.
Investing starts already at the time of the first payment at the beginning of work. In the future, current calculations will help pay wages on time and pay for consumed materials and resources. The investment object produces a certain product that has a demand in the market, due to which it is possible to obtain an influx of funds from which the investor makes personal profit.
Opportunities and danger
Investing in a new product, enterprise, market is considered rather risky. The results can be predicted, but assumptions usually have a low level of accuracy, which creates an additional danger for the investor.
To calculate the effectiveness of a particular type of investment, you need to not only analyze the dangers associated with the planned operation, but use the methods of sensitivity analysis. There are relatively simple algorithms and very complex ones. The second are more accurate, but correctly calculated only by experts in their field. The use of simulation techniques is common.
Investing: everything is important
In order to succeed as an investor, an entrepreneur must understand that knowledge of the gradation of investment categories is not the key to success. You need to navigate the chain of actions that allows you to make investing a profitable activity. The sequence is as follows:
- the formation of the plan;
- accounting for realities;
- project report;
- analysis of the results.
By grouping investments by type depending on various indicators, it is possible to realize the strategic ideas of the company’s development. Investment management is equally important both at the level of a private entrepreneur and the state.
Big and small: everyone is involved
Investments are:
- private
- municipality;
- state.
Depending on nationality, there are:
- domestic;
- foreign;
- mixed.
Depending on the source of the money allocated for the development of the enterprise, they talk about investments:
- borrowed;
- from the budget;
- attracted;
- of their own.
You can not neglect
All of these types of investments are extremely important for an enterprise interested in success. Money received from these sources can be sent to a variety of assets and liabilities of the company, including housing and non-residential buildings and facilities.
It is customary to talk about different categories of investments, evaluating the investment period and payback period of finances. If this period lasts less than three years, then the investment is classified as short-term. The average time period is three to five years. Finally, it is customary to classify as long-term those that stretch for a period of more than five years.
To risk or not?
Sooner or later, this question arises before every potential and already established investor. You must understand that some investments involve a complete lack of risk, but with this type of investment you should not rely on large profits.
In addition, there are groups of investments with low, high risk, as well as speculative, when they invest money in enterprises with the highest level of risk, hoping to get the maximum return.