Long-term investments are free assets that are not used to support the current standard of living or production activities of the company. A long investment period, from 12 months, provides high liquidity and stable income, with a competent approach to the selection of objects.
What it is
Investments of material resources in projects, the payback period of which starts from one year, are called long-term investments.
The attractiveness of such deposits for experienced and novice entrepreneurs lies in their exceptional reliability and guaranteed profit.
Be long term investor means a willingness to accept a certain risk in pursuit of potentially high profits, be patient, “forget” about the invested capital for a long period of time. Therefore, if the money is intended for a meaningful, expensive purchase in the near future, it makes no sense to consider such an option.
The key qualities that an investor must develop are analytical thinking and complete control over emotions. Although long-term investments very little depend on the current situation in the market and the economy of the country as a whole, few people manage to completely abstract themselves from the fact that their own money will not soon return to their hands. And the price of assets will periodically fall and rise in price.
An investor with an unstable psyche can panic and do stupid things. For example, start selling stocks, even at a loss to yourself. Patience and adequate assessment is the only way possible to achieve successusing long-term investments as a source of income.
Long-term investments have a complex classification.
They are divided according to the types of objects:
- Securities (shares, bonds, bills of exchange, certificates of deposit);
- Tangible assets (construction, real estate, manufacturing, equipment, raw materials);
- Intangible assets (personnel, education).
By stages of development of the financed project:
- Completed – full implementation, with the prospect of development (appreciation). For example, an apartment in a new building (investment) has been commissioned, but internal repairs are still being carried out, the infrastructure of the area is improving, the transport issue is being resolved, etc. In 3-5 years, the cost will increase at least 2-3 times, and then you can sell with maximum profit.
- Incomplete – investments occur at the stage of project development. Using the example of the same real estate, this is an investment in a house in the phase of laying the foundation. With each floor raised, the value of the asset increases. By the time of commissioning (on average 2-3 years), the rise in price will be 25-30%, which will be the net profit of the investor.
Long-term investments by type of dividend payment:
- One-time (one-time) – provides for a profit at the end of the investment period, after the sale of all assets (real estate, securities).
- Distributed (possibly lifelong). For example, renting out buildings and structures put into operation.
Investment goals also have an important impact, both on the size of future income and on the timing of the investment. It is customary to distinguish between strategic and profitable. The first is access to the level of big business (takeover, merger of companies, development of the economy of a district, city, region). The second is the increase in equity capital.
Obviously, large investors who have been successfully operating for a long time have more opportunities. Serious investments in construction, large manufacturing companies give the same serious profits. For beginners with small capital, injections into securities are available, with a gradual build-up of assets.
But first, it’s worth exploring what investment options are generally available.
The easiest and most effective way of long-term investment.
In theory, you can buy shares yourself on stock exchanges. In practice, a newcomer has nothing to do here – only through special organizations, for example, mutual funds. Although the risk is borne by the investor, the funds will make sure that it is minimal. Long-term investments, as a rule, are carried out in several types of securities at once (investment portfolio). These can be shares of a large global brand, emerging companies (which have already gone public), government bonds.
Investing in dollars is a classic example of investing that the vast majority of citizens are familiar with. But long-term foreign exchange investments are a professional approach. Euros, dollars, Swiss francs (all stable monetary units) are kept in special deposit accounts, without the right to early withdrawal (from 1 to 5 years). At the end of the term, the currency is sold. As a rule, profit consists of two components – the interest rate of the financial institution and the exchange rate difference.
Long-term investments in transport, production equipment are widely used by companies, but for the purpose of development, and not with the aim of obtaining direct profit.
The exception is leasing organizations that purchase equipment for leasing and subsequent sale. Such investments have rather high risks associated with depreciation during operation.
That is, every year, for example, a car or a conveyor line for the production of cinder block, will depreciate. Therefore, such investments are of interest only for persons (companies) interested in products. Exceptions do happen, but rarely.
Every person who has bought a home (including a mortgage) is related to investments in construction and real estate. The goals are different – the subsequent sale, rent, accommodation. But liquidity, in any case, is very high. Long-term investments in construction allow you to profitably purchase an apartment, receive a passive lifetime income or a one-time profit, ranging from 30 to 100% of the investment amount.
It is enough to have capital equivalent to the average cost of housing in the region and you can act. It is best to invest in new buildings, at the stage of pouring the foundation. The payback period is 2-4 years. But secondary real estate in a promising area will also bring serious income in 4-5 years.
Jewelry and art objects
This type of investment is almost identical to foreign exchange investments. The only objects are antiques, valuable works of art, jewelry made of precious metals and stones. Efficiency can be described by a single example. Businessman Dmitry Rybolovlev bought Leonardo da Vinci’s painting “Savior of the World” in 2013 for $ 128 million. In 2017, he sold it for $ 400 million. The mechanism is applicable to any items, the value of which will increase in the future.
The only drawback is the high risk associated with increased scammers’ attention. Alternatively, store valuables in a safe deposit box, having previously taken care of insurance.
It will take several years to fully appreciate the benefits of a long-term investment. But 90% of investors are satisfied with the results. Experts recommend putting aside prejudices – omens, intuition, fortune-telling by the stars. Only common sense and scrupulous calculation will help to achieve this goal.
A few simple yet effective tips from professionals for beginners will help you create your first action plan:
- Choose a reliable broker. This ensures 50% success. At the slightest doubt about professionalism, immediately change the exchange intermediary.
- Investment portfolio formation. Investing in a single object is a common beginner’s mistake.
- Stocks are bought during the period of least demand and, conversely, sold when the price is at a high level. Swimming against the tide is characteristic of the most successful people on the planet, it is worth following their example.
- Don’t invest your last money. The very essence of investment presupposes the availability of free funds, the investment of which will not in any way affect the current standard of living.
It is easy to make a decision to start an investment activity. It’s harder to think like an investor. Therefore, it is recommended to work with the psychological aspects of your own personality in order to calmly and soberly reason.
Making a profit in the long term is difficult for an ordinary person to comprehend, especially in Russian realities. The country has experienced serious economic crises several times, as a result of which many citizens have lost their savings. Therefore, even progressive youth are wary of “long-playing” projects. But, the history of the world economy claims that only long-term investments can bring high wealth.
Random big money (inheritance, winning the lottery, own savings) can very quickly turn into pleasant memories if not made to work. Moreover, modern life provides unlimited opportunities, ranging from types of investments to financial instruments. In your opinion, what are the most attractive and profitable long-term investments for a beginner entrepreneur? Share your point of view in the comments.