Investing for beginners from scratch. Investment strategies
Investments and finance in a general senseare considered as means used to obtain a certain positive result. It can be monetary, defense, intellectual, social and so on. Such an interpretation of these concepts goes beyond economic considerations. From this point of view, investment and finance act as an instrument for obtaining large amounts of money, extracting income, or increasing capital. They can also be used for both.
The essence of investing
The above definitions interpret this conceptas a means of building up own capital and a method of achieving non-economic goals. For example, the state, investing funds from the budget in the development of astrophysics, does not expect to make a profit. However, the infusion of capital into this sphere makes it possible to conduct important research work. In a narrow sense, investment involves incremental investment. The general definition is given in the Federal Law. In accordance with its provisions, investments are treated as securities, cash, other property, proprietary rights with value. They are invested in objects of entrepreneurial or other activities to generate income or achieve another useful effect. Capital investments are treated as investments in fixed assets. These include, inter alia, the costs of re-equipment, construction and reconstruction of existing enterprises, the cost of purchasing equipment, machinery, tools, as well as for design and inventive activities, etc. Investments are considered in a wider than capital investment, and in a narrower sense than costs. Costs, for example, can be one-time and current. The first can be attributed to investment.
Features of the implementation
In the modern economic system,different types of investment. Contribution of funds is carried out in certain programs, the implementation of which allows you to achieve your goals. They are presented as a set of actions and activities that do not contradict the norms of legislation. Investments in projects are carried out during a certain period. In the above-mentioned FZ, the concept of the program is presented as a justification for the economic feasibility, timing and volume of capital investments. To this category, the legislation also includes documentation developed in accordance with applicable standards, and approved according to existing standards and in accordance with the prescribed procedure. The investment project is, among other things, a description of practical measures for investment (business plan). The law introduces an additional concept. In particular, the provisions provide for such a definition as a "priority project". It is considered as a complex of measures with a total volume of capital investments that meets the established requirements and is included in the list approved by the Government.
Practical implementation - the beginning of investment -It is inconceivable without the implementation of a certain individual or collective activity. Inherent elements of this work are subjects and objects. The first include organizations and citizens who carry out purposeful activities in the process of solving the tasks set in investment projects. Subjects are:
- Contractors (executors).
- Users of objects.
- Other participants.
Legislation provides an opportunity for one entity to combine the functions of two or more project participants, unless another is established by the state contract or contract.
As they are the created differentproperty of organizations and enterprises of non-production and production spheres, certificates, bonds, shares and other securities, products of scientific and technical nature, real and other rights (including intellectual property), cash deposits. Among the objects of attachment can also be identified:
- Geological exploration work.
- Objects of communication and transport.
- Housing construction.
- Objects of agricultural designation.
- Structures of the social sphere (educational, medical, cultural and enlightenment institutions), etc.
Investment strategies are formed on different grounds:
- Attachment objects.
- Terms of investment.
- Forms of ownership.
- Territorial orientation.
- Sources of receipt of funds.
- Economic spheres.
- Industry focus.
- Opportunities to participate in management and so on.
The main classification is classificationinvestment activity by objects. In accordance with this sign, financial and real investments are allocated. The latter, in turn, are divided into intangible and material, the latter - to portfolio, direct and others.
As objects of material investmentthere are constructions, equipment, machinery of a building and so on. Intangible investments are aimed at the acquisition of licenses, patents, the implementation of programs for the development of skills and retraining of personnel, payment for research activities. In the framework of statistical practice, real investments are called contributions to non-financial assets. Their accounting is carried out according to the IMF Methodology.
Financial investments are presented ascapital investments in bonds, shares, certificates and other securities, as well as to bank accounts. As was said above, they are divided into portfolio, real and other contributions. The first ones include investments in AO shares to receive dividends and rights to participate in management activities. They are carried out by organizations and individuals, who own the enterprise or control at least 10% of the authorized (chartered) capital or securities. Portfolio names are investments in various types of shares that belong to different issuers, in order to increase the probability of obtaining an income. This category includes the purchase of bonds, shares, bills of exchange and other debt securities. Their share is less than 10% in the share (charter) capital. Those investments that do not fall into these categories are indicated as "other". Among them, for example, trade loans, government loans from foreign countries under guarantees and others.
Type of ownership
By this criterion, as a rule, there areforeign, private, public and mixed investment. For novice investors, appropriate methodological materials are developed, which provide an expanded classification. In particular, in the statistical practice allocate municipal deposits, participation in consumer cooperatives, religious and public organizations. Mixed investments are classified into joint domestic and Russian-foreign.
Statistical practice uses the classificationby directions of use. For example, investments in fixed assets are subdivided by forms of ownership, economic sectors and so on. Depending on the regional (territorial) characteristic, internal investment should be highlighted. For beginners of the activity in question, they often act as the most simple and effective tool for making a profit. Investments in the domestic economy are divided, in turn, by regions. In addition, there is also external investment. For novice investors, this option can also become a very promising way to increase capital. Depending on the economic sphere, production and non-productive types of activity are singled out.
Degree of risk
On this basis, there are different classifications. Books on investment distinguish, for example, categories such as conservative, aggressive and moderate investments. The first are characterized by low level of risk and high liquidity. The latter category is characterized by moderate probability of loss. Aggressive investments are characterized by high profitability and a degree of risk, low liquidity. In accordance with another classification, high-, medium-, low- and non-profitable investments are allocated.
How to start investing?
From scratch, you can not earn money in the investment sphere. To get income, you need to have certain funds. Before you start investing, you need to check the state of finances. In modern conditions, the cost of living is growing fast enough, compulsory payments are increasing. In this regard, those funds that were planned to be invested elsewhere may not be enough.
Knowledge of them is necessary in order to competentlyto invest. Where to begin? In which program to invest? How much money is needed to make the first investment? For novice investors, these issues are the most urgent. To navigate in the system, you need to know the basic terms and understand them correctly. In this case, the decisions made will bring the desired effect. It is necessary to understand the difference between a deposit, mutual funds, bonds, shares. It is advisable to study a number of economic theories. For example, it is useful to investigate questions on portfolio optimization, market efficiency, diversification. All useful information contains books on investing. These publications explain the main terms that need to be known, various schemes of investment, examples are given. In addition, the largest domestic brokers provide an opportunity to attend online courses on investment. Seminars on this activity are also quite popular.
Any investment guide contains thisparagraph. Before you invest, you need to determine the purpose of this operation. In general, all investors are eager to generate income. However, the profit will be used in different ways. The purpose of investment will depend on the age, world outlook, plans for life, work experience, specifics of professional activity and other circumstances.
Determination of the permissible risk
Immediately before the attachment is madeIt should be established what level of probability a loss the subject may incur. In this case it will depend more on age. As a rule, young people are ready to take risks, invest, lose, and invest again. The older generation, on the contrary, seeks a stable income generation. Existing investment projects assume a different level of risk. From them you can choose the most suitable.
It is selected in accordance with the attitude towards risk. Investors can be conservative or aggressive. In the first case, about 70-75% of the savings depositors hold in low-risk assets (government bonds, for example). For the most aggressive investors is characterized by an investment of 80-100% of the equity capital.
The value of the deposit
The higher the payment for the purchase of assets, the smallerincome can be obtained from the investment. As a rule, the passive method assumes the lowest costs, and trading - the maximum. The commission is charged for operations in the stock market. It is received by brokers. For novice investors, it would probably be advisable to resort to cheaper agents or lower tariffs. But in this case, the service is likely to be limited. At the same time to commit any non-standard action will require additional payment. If the investment is carried out in Mutual Funds, experts recommend that you carefully study the sections of contracts concerning mark-ups and discounts, as well as commissions for successful investment.
This stage is considered the most important for a novice investor. When choosing a management company or broker, pay attention to:
- Results of activity for a long period.
- Correspondence of tariff plans to the chosen style of investment.
It is advisable to review the ratings of brokerage companies, read reviews, consult with specialists.
Selecting an attachment object
Experts recommend dividing the existing capital into three parts:
The funds that will be invested in shares andbonds, should be broken up into several parts. They can be invested in various securities. Cash may be required to pay the broker and to make any purchases in the upcoming periods. The size of the shares to which the funds will be divided depends on the style of investment. Similarly, it is possible to split the capital for investment in mutual funds, deposits.
Often, income is limited to fearor greed. Any investment portfolio is subject to short-term fluctuations. In some cases, they can be quite noticeable. In such cases, you should not panic or be too happy with sudden success. If the feeling of anxiety for their own funds becomes inconvenient, it is advisable to revise it so that it more closely matches the style and objectives of the investment.
Revision of investments
At the initial stages of investing, subjectsacquire bonds, shares or shares under a certain plan, distributing the probable risks and the expected profit. However, over time it may turn out that the cost of one part of assets has sharply increased, and the other has fallen. This situation will change the ratio of securities originally embedded in the portfolio. And this, in turn, violates the investor's plans. In such cases, the portfolio is rebalanced. This procedure consists in selling part of the price increase and buying part of the assets that have declined in value.