Investments

Investments  — placing capital with the aim of obtaining profits . Investments are an integral part of the modern economy . Investments differ from loans by the degree of risk to the investor ( lender ) — the loan and interest must be repaid within a specified period, regardless of the profitability of the project, investments (invested capital) are returned and generate income only in profitable projects. If the project is unprofitable, the investment may be lost in whole or in part.

how to invest 50k wisely  — cash , securities , other property , including property rights, other rights that have a monetary value, invested in objects of entrepreneurial and (or) other activities in order to generate profit and (or) to achieve a different beneficial effect .

Investment activity  — investment and implementation of practical actions for profit and (or) to achieve a different beneficial effect .

From the standpoint of the monetary theory of money , money can be spent on consumption or savings . Simple saving withdraws funds from turnover and creates prerequisites for crises . Investing also involves savings in circulation. It can occur directly or indirectly (placement of temporarily free funds on deposit in a bank that already invests itself).

Investment or speculation 

The line between investment and speculation is blurred. Typically, the criterion of differentiation indicate the time factor. If the operation lasts for more than a year, this is an investment, and it will give an economic effect a considerable time after the investment. If up to a year — this is speculation. For example, «Modern Economic Dictionary» indicates:

Investments — “long-term investments” of public or private capital in your own country or abroad with the aim of earning income in enterprises of different industries, entrepreneurial projects, social and economic programs, innovative projects .

At the same time, when they talk about stock trading, they talk about attracting, for example, “ portfolio investors ” who are sensitive to the situation on the market and can leave it, not paying attention to the duration of transactions.

According to the nature of the contracts concluded, actions taken, goals, legal consequences, exchange investments and speculations do not differ.

Benjamin Graham suggested that the investment be considered an operation based on a thorough analysis of the facts, prospects, safety of invested funds and sufficient income. All the rest was recognized by speculation.

Often, a distinction is made according to the criterion of organizing a new business (real investment, funds are spent on the purchase of equipment, raw materials, personnel training) or participation in an existing business (speculation, funds are spent on the purchase of corporate rights, securities).

Sometimes the criterion of separation is the purpose of the operation. Speculation is considered an operation, in which the goal is the difference in price (shares, shares, goods). The transaction can last for a long time, but the income is formed only once when the asset is sold or redeemed. An investment is a transaction whose goal is interest income (dividends) accrued on the acquired asset. Accruals are systematic and the circulation time of the purchased asset is not limited.

Attracting investment

It is believed that in order to attract investments, an enterprise should:

  1. Have a well-developed and forward-looking plan for the future. Investors want to know that their contributions will make a profit in the future.
  2. Have a good reputation in society. By investing in a shadow enterprise, investors risk losing profit, so they choose only those enterprises that inspire confidence.
  3. To conduct an open, that is, a transparent activity. This requires accounting statements and work with the media .
  4. Much depends on the internal policy pursued in the country in which the company is located. For contributions, investors choose the most stable countries.

However, in practice these conditions are necessary for portfolio investors . Investments may well be attracted without these conditions, but with investor confidence in the observance of their rights to manage capital and profits. Such confidence can be guaranteed not only by laws and transparency of accounting, but also by personal contacts, for example, in the government or parliament, the right to directly control the situation in the enterprise through a controlling stake and the appointment of a subcontrol director or personal direct leadership. A significant factor in attracting investment is the ratio of profit and risk. Some investors choose less risk by agreeing to lower profits (and vice versa). Raw materials companies generally do not have to choose: go where there is a resource.

In addition, special conditions are sometimes created to attract investments . An example of the creation of such special conditions are special economic zones (SEZ). For example, in Russia , the Lipetsk SEZ, the Alabuga SEZ, the Togliatti SEZ, and others are established and are currently operating .

The set of conditions for an investor is sometimes called the “investment climate” .

Pros and cons of attracting investment

At the initial stage, foreign investment gives companies two main advantages:

  • capital to move to the next stage of development;
  • improve the quality of management, in particular by strengthening discipline and adjusting the strategy

Оставить комментарий