In the modern economy, the definition of investment is quite extensive, different experts and analysts offer significantly different formulations. The content of this phenomenon largely depends on the angle of view on it, that is, on the researcher's belonging to a specific area of the economy as a science. Much is determined by the specifics of practical activity.
Basic understanding of the phenomenon
The very word "investment" came to our language from other countries. It is formed from a Latin root meaning investment. This is the concept of the term investment - funds, capital, which is channeled with certain goals into a project with the expectation of an increase in basic values over time.
Capital gains in the investment process involve some risk. In many respects, the success of the project is determined by the inflation rate. Not always the capital invested in the project becomes a source of profit, there is a risk of not getting the promised, promised interest. At the same time, it is precisely the potential increase in invested funds that is the main motivation for such entrepreneurial activity. Investing resources and gaining benefits through them is a time-bound process. The concept of investment includes the possibility of investing (including gradual) capital, while ultimately obtaining some material advantage. You can invest at the same time and get advantages through them. One of the ways of investing is to invest finances at certain time intervals and receive a reward some time after the next “portion” has been provided to the recipient.
Features of different options
Considering the concept and essence of investments, it is necessary to understand that with different schemes, the risks differ from among the above, as well as the profitability of participation in the project. For example, the very first of the described mechanics assumes that hardly all the funds put under the program are directed to the recipient, the investor immediately receives the entire amount of the profits put to him. The second option is to get financial benefits when the long process is over. In some cases, investing and skimming are separated by a time gap. The riskiness of the plan, the magnitude of the benefits, the productivity of participation are determined by the specific individual characteristics of the project and the chosen form of depositing funds into it.
Money and more
As can be seen from the specialized literature, recently the concept of investment, sources of investment are increasingly closely associated with the phenomenon of securities. Moreover, the process itself is reduced to investing in bonds and stocks. Some specific laws of individual powers oblige them to regard such activity not as investing, but as capital investments intended to reproduce fixed assets. However, when concluding an investment agreement in each specific case, the parties to the interaction may agree to spend the funds received from the investor on the turnover component, the purchase of intangible property.
Money or not?
The basic concepts of investment are quite different in terms of investment assessment. For example, some experts believe that the term can strictly mean money invested in the activities of a certain enterprise. But other analysts are convinced that it is possible to invest property, as well as assets from the non-property class.With this approach to investment, software packages, work experience and other property items can be attributed. Do not ignore information related to commercial activity, modern technologies and equipment. Important investments in the activities of the enterprise are experience, rights to use resources, property rights. All of the above can be safely attributed to investment assets.
Analysis of the concepts of investment and investment activity involves the study of intangible, intellectual investments. It is customary to include intellectual property here, as well as the author’s rights provoked by it, patents, inventor’s rights and special opportunities for the use of samples, models. At present, quite progressive know-how registration schemes have been developed, which can also be the subject of investment.
Theory and practice
The concept of investment and investment activity is considered in detail in fintheory. This science suggests formulating a definition as an opportunity to purchase an asset (monetary, real). With this approach, investments become such expenses incurred in the present day, which in the future should become a source of profit.
The described logic of thinking allows you to define investment as a process of exchange. The investor, having some reserves today, exchanges them at the moment, knowing the exact exact cost, for a future valuation, which is not determined, although in some cases it is calculated with a high degree of accuracy. The level of probability of profit is largely determined by the riskiness of the planned operation and the stability of the enterprise in which the assets are invested.
About property
The concept of investment assessment is based on the exact definition of the form of ownership in relation to a specific object of the transaction. Currently, it is customary to talk about public, private, foreign investment activities. The first option involves financing by the budget (federal, local), enterprises owned by the country. Private - these are investments that direct individuals, legal entities that do not belong to the state, into a potentially attractive project.
The concept of foreign investment and the ability to take advantage of such entrepreneurial activity in practice are quite curious. The term itself refers to such credit, attracted financial values, which are provided by individuals, legal entities registered in other powers. In addition, countries are entitled to engage in foreign investment by investing in other states.
Multifaceted phenomenon
Currently, the concept and classification of investments is a rather extensive and promising area of research for economics, analytics and financial sciences. Investing with this approach is a long-term program, according to which the funds are directed to the project with the aim of future profit through them. The main condition for successful participation in such a program is to obtain a total exceeding the investments made by the investor. This applies to both intellectual and property.
It is customary to include investments as finances, deposits, shares, securities. The concept and classification of investments oblige to take into account the transfer to the project of opportunities for its development in the form of property - movable property, real estate, values. In some cases, the investor provides the recipient with intellectual property values, as well as rights to certain property, technical documents giving access to specific important information about technologies, techniques, commercial approaches and other branches of knowledge that are important for the enterprise. You can invest by transferring the right to use various resources, objects, as well as other rights related to property, values.
All your name
All of these elements included in the concept of investment are objects of investor activity. It is important to remember that monetary forms can belong to the number of objects, but only they are not exhausted, despite certain stereotypes in circles that are far from investment practice and economic theory.
Capital investment is a variety of programs for transferring property, movability, real estate, values, tools for working on the stock exchange. The concept of foreign investment involves the transfer of such objects from representatives of other powers, as well as from other states themselves, and here the activity in question is not limited to money. Intangible assets, rights, patents, signs - all this can be safely attributed to the category of investments.
Classification and Theory
The concept of investment requires the analysis of financial assets invested in a project. The main condition for investment activity is the provision of resources for the implementation of economic activity. The investor's task is to preserve and increase the funds that he currently owns. In addition to capital, it is customary to talk about portfolio investments. The former are also known as real. They suggest the allocation of funds for the formation of physical capital. The second (they are called financial) include investments in the acquisition of securities, the application of financial instruments in practice, which allows you to make the initial investment capital more.
Another way of investing is to acquire land, real estate, license, sign. All these objects are available for subsequent sale, transfer by agreement of lease and other types of use in order to obtain benefits. At the same time, the activity must comply with the basic tenets of the concept of investment, that is, be a source of preservation of invested funds and increase them over time. You can use for such activity not only your own hard-earned money, but also attracted financial resources received from other investors.
Special occasion
Currently, the concept of investment includes such external funds that the company receives when it starts issuing securities. Many large enterprises of our day offer those wishing to purchase bonds, stocks. All of these tools are available in the specialized financial market. They are beneficial for a potential investor who knows how to buy on time and sell for a profit purchased at a convenient time. The quoted value, which shows growth, will bring profit to the enterprise itself, whose shares are in circulation. Protecting the interests of investors in the stock market is organized through a special registration system. Everyone has no right to issue or sell a security, first you need to go through a special registration procedure and confirm that stocks, bonds have a real financial base. This allows you to reduce the risk of a potential investor.
Investment strategies
The concept of investment assessment is fundamentally important for someone who is interested in participating in such a program with the goal of making a profit. Currently, the assessment is made taking into account the preliminary selection of the optimal strategy for a particular case. There are two types of investor behavior:
- passive;
- active.
The first assumes that the investor knows the concept of investments, their types, and is interested in participating in the program when the economic profitability of the investment project remains at approximately the same level. But an active strategy improves the ability of enterprises to compete in the market. This leads to an increase in the profitability of operations, which means that more profit is received by both participants in the project and its investors.Most often, achieving a new level is due to the introduction of the most modern and advanced technologies, approaches, production capable of competing in the product market. The task of the enterprise in which the funds are invested is to expand the sales market and absorb the rivals. This will cause the growth of stocks in price and increase profitability both for the company itself and for investors providing it with development money.
What to do?
To be an effective, successful investor, you need not only to know the concept of investments and their types, but also to be able to manage the instruments received at your disposal. Several most effective methodologies have been developed. Most of them are based on a sequence of steps:
- creating a plan;
- embodiment of strategy;
- activity control;
- Quality control.
And if in more detail?
Planning is rightly considered a key stage, the most important, determining profit in a particular case. In fact, this is the beginning that organizes the whole process as a whole. To successfully create a plan, you need to navigate both theory and practice. Knowing, for example, that they include the concepts of investment in national accounts, foreign investment opportunities, private by various people, guided by how to optimally choose the direction for investing assets, you can plan a really effective investment program, the profit for which will not disappoint. It is important already at the stage of creating the plan to correctly assess all the risks associated with the interested project.
After the formation of the plan, you can begin the implementation of the project. It is about providing the selected company with the funds available to the investor. During the entire time of the current agreement, the task of the active participant is to control the work of the company and regulate its own investment activity. As the work with the project is completed, they analyze the results and evaluate how effective and efficient it was, and to what extent it helped to achieve pre-defined goals. The knowledge gained is important not only in the framework of analytics of the past, but also as a foundation for planning the next investment activity.
Investing is important
Success, development, and state regulation of this process are the key not only to the profit received by specific objects and subjects of the investment program, but also to the benefits for the state’s economy as a whole. The macro level considers investment activity as the basis for the development of the national economy. Own production is growing through investment. This is due to improving the quality of products, their ability to enter the competition. Sophisticated state support for investment allows you to balance the various areas of business in the country, to form the optimal raw material base, to improve exports. At the same time, through investing and debugging this process, a number of social problems can be solved.
Investments are a way of growth of national wealth. The economic condition of a power is largely determined by how successfully individual entities (companies, institutions) function. And their work is better, the more active and efficient investment.
Objectives of investing in the enterprise
The microlevel of investment allows the company to expand its area of activity, increase its activity, prevent excessive wear of OPF, increase the technological level, as there will be funds for the acquisition and implementation of technologies and equipment. Investments - a source of resources for the purchase of a controlling shareholding. Through the investment program, it is possible to organize conditions for stable activities, financial stability and normal functioning of the company.
Investments not only cause and cause economic growth, but also depend on it themselves.To assess the degree of influence, you must first calculate the gross investment, that is, the total amount of funds that were used to purchase production assets, construction, inventory materials. To do this, analyze the spent over a specific time period. An equally important indicator is net investment, which reflects how good the current economic situation is. It is reasonable to calculate net investments to assess the state of the country as a whole, and not an individual enterprise in particular.