Usually we hear about investments in economic news that are related to the development of an enterprise, industry or country. Most people think that this concept has nothing to do with their life. But the reality is that investment is a vital necessity for everyone who thinks about their future and the future of their family. Let’s figure out what investments are in simple words, what they are for, and where to start for a beginner.
The concept and meaning of investment
In simple terms, investment is an investment of free capital in various financial instruments in order to make a profit. Basically, speculation has the same goals, but on short time frames. While investments allow you to receive income for many years.
Many people think that saving and investing are similar processes, but in reality they have a fundamentally different approach. The money in the nightstand depreciates over time – every year inflation “eats up” 10-15% of the amount. Investing in financial instruments allows not only to preserve capital, but also, with a competent approach, to increase it. This is the main advantage of investment. They also help provide financial security for the future.
People who invest are called investors. Anyone can become a private investor – a middle-level manager, financier, doctor, teacher, student or retiree, this does not require special education.
Investment directions
Investments in real estate. Practice shows that the value of real estate is growing steadily. Accordingly, this is one of the most profitable and safest ways to invest money.
Investments in gold. Since this is a reserve asset, in a stable economy, its value does not grow, which means that it may even turn out to be below the inflation rate.
Purchase of antiques. This type of investment is more likely to belong to the professional sphere, therefore, one cannot do without special knowledge and experience.
Setting up your own business. It takes time and a lot of effort, plus there is a high risk of burnout.
Investments in securities. The best option: highly liquid, there are no big risks with a competent approach, in addition, you can start with a small amount and with minimal experience.
Investment terms
For convenience, private investments are divided into groups depending on terms. There are three of them:
- Short-term (up to a year);
- Medium-term (from 1 to 3 years);
- Long-term (from 3 years and longer).
Investing style
In our time, two main styles of investing have emerged.
Passive investing. It is characterized by long-term investments. This style assumes that a person has invested money, for example, in the shares of a company, and keeps them for several years without selling. As a rule, passive investments are made in large commodity, technology, financial companies – they have a lower risk of a sharp drop in quotations, often such companies pay dividends.
Aggressive investing. This implies that the investor is investing in riskier instruments. For example, in the shares of not the locomotives of the industry, but in the shares of smaller companies – when the markets fluctuate, such securities rise or fall more strongly (that is, they have high volatility), but due to the same quality, you can earn more. This type of investment requires a deep understanding of the market and a willingness to lose the investment.
