Investing has always been considered one of the most attractive types of earnings. The investor is engaged in the formation of passive income. By investing free money now, he receives a stable profit in the future. Do you want to know the secret of how to learn how to invest wisely? Then let’s figure out who an investor is and what he does.
Profession or vocation
Man himself has the right to choose how to make money… Be it a classic form of formal employment, passive income or starting your own business.
According to the classical definition, an investor is an individual or a company that places free finance in investment objects in order to increase investments and receive regular passive income.
For many decades, there has been an opinion that only people who are professionally trained in the field of economics can engage in investing. In fact, anyone can become an investor.
Historically, Russia is dominated by a dismissive attitude towards wealth, which was considered the result of illegal activities rather than competent financial decisions. From childhood it was suggested that an exemplary citizen should study well, then “earn” a pension. Familiar situation? At the same time, a person works most of his life “for a penny”, takes loans, gets into debt, becoming a victim of the banking system.
He does all this instead of diligently preparing “fertile soil” now, and providing himself and his descendants with the necessary so that old age does not threaten poverty, but pleases with new opportunities.
Therefore, you can change your life by changing your worldview and developing a new model of psychological behavior.
Who is it
Russian legislation has a clear idea of who is recognized as a qualified investor. These are brokers, banks, funds that specialize in financial support for medium and small businesses.
A private investor is a person who invests his own finances in order to make a profit to improve living standards. There is a key point to keep in mind. The income received must exceed the level of inflationary processes, otherwise the main task of increasing capital will not be solved.
Investing by individuals differs from traditional bank lending, when a return on investment and interest for their temporary use are guaranteed. When an individual invests assets, there are investment risks of receiving income that is significantly less than expected or being at a loss.
Most often people choose for investment:
- securities (shares, bonds, bills of exchange);
- precious metals;
- the property;
- promising entrepreneurial projects;
- jewelry, antiques, old coins and more.
Traditional investment objects are characterized by growth in price in the long term, regular dividend payments on shares or in the form of coupons on promissory notes.
Goals and objectives
Long-term investment of funds (investment) always pursues the goal of obtaining a stable income.
It is financial wealth that determines the success of a depositor. At the same time, a talented investor understands that in order to collect a rich harvest, it is necessary to prepare fertile soil, carefully select seedlings and painstakingly care for them. This is the only way to achieve financial success. In addition, an investment portfolio, like family capital, can be inherited, providing not only oneself, but also descendants.
To achieve this goal, making the final investment decision is preceded by a thorough analysis of the business idea, the strengths and weaknesses of the investment object are determined. And only on the basis of absolute confidence in a positive result, the investor makes investments. It is not limited in the choice of the field of activity, as it is an absolutely independent unit of financing.
The investor independently chooses which area to support and how much to invest, observing the main investment goals:
Risk minimization most often involves the choice of state investment objects, which negatively affects profitability.
Return on investment
The pursuit of higher returns forces the investor to sacrifice safety. After all, you can get a good profit by investing in little-known promising projects that will “shoot” at a long distance.
Paradoxically, the increase in invested capital is directly proportional to the degree of risk. The more risky the project, the more profit it can bring. By investing in stable companies, you can expect a small increase in investment.
A competent investor thinks in advance of ways to exit an investment project. The possibility of converting the investment object into a monetary equivalent in the shortest possible time and with minimal losses is ensured by the liquidity of the investment project.
In practice, an investor will not be able to apply all criteria to one property. The depositor will have to choose the most suitable option, in accordance with the desired result.
Taking into account the chosen strategic principles, investors are divided into the following types:
- Strategic – those who want to participate in the management of the company, the shares of which he is purchasing.
- Portfolio – create their own investment portfolio, taking into account the degree of riskiness and liquidity in order to increase assets.
- Speculative – investors who choose short-term transactions in the stock market to get profit when selling an investment.
There are ups and downs on the path of investor activity, so each investor chooses his own tactics. In this regard, a distinction is made between:
- Risky who prefer to invest in projects that are unpredictable in terms of future profitability. In this case, it is possible to obtain two opposite results: to get the maximum profit or to lose everything.
- Conservative investors – carefully form an investment portfolio for the long term. In most cases, the financial instruments of such investors do not change. They receive a regular but small income.
- Moderate – they select investment objects based on the acceptable degree of risk.
All investors can be divided into 2 categories: professional and non-professional. Professionals choose investing as their main way of making money. Non-professionals, in turn, consider investments as an option to generate additional income.
- Speculators who want to make money on the difference from the resale of shares and other financing objects.
- Managers – provide an opportunity for everyone to invest their assets in profitable projects, but on their own behalf.
- Independent – acting on their own initiative, relying on their own knowledge and assumptions.
- Dependent – do not want to delve into and make independent decisions, entrusting the conduct of investment affairs to a professional broker.
In addition, there is currently an opportunity to invest in foreign companies. In this case, a person acquires the status of a foreign investor.
How to find investors
Today there are many sites where entrepreneurs can find financial support in the form of investment:
Private venture capitalists investing in new, often innovative, projects that introduce a fundamentally new product (startups) and are of the risky type. Such investors prefer to remain “in the shadows”, can act independently, and also unite in clubs and associations.
If you need large cash injections, it is possible to get investments through a credit institution. Many banks have offers for business, but in this case, you will need a pledge and surety.
Investment organizations are interested in innovative endeavors.
Here, the founder will have to provide a business plan, demonstrate a working model of a product or technology in order to win the fund’s interest.
The network has special sites for startups, where talented businessmen can post a description of a future project and find an investor.
Popular web resources:
- Wanted Venture Capital.
Organizations specializing in the management of promising projects from drawing up a business plan to the commercialization of a company. Business incubators more often located on the basis of universities or other scientific institutions.
There are social networks on the Internet where you can contact potential investors:
These are educational programs that develop the project and help find investors, doing everything to attract them. The support ends after the project is financed.
As a rule, for their work, accelerators require 3-7% of income to return their investments.
Direct investment market
Private equity firms finance large projects. After a while, they sell their share for a good profit.
How to start investing
To obtain the status of an investor, it is necessary to regularly invest money, having previously analyzed the investment object. Investing doesn’t have to be random. To do this, you do not need to have impressive assets, you can invest a small amount. Novice investors are advised to start with a modest investment, as lack of such experience can lead to a loss of investment.
The main mistake of newcomers is unjustified expectations of a quick result already in the first month. In practice, investment begins to bear its first fruits over a long period of time. One has only to be patient. Excessive emotionality is a bad counselor that can only lead to a stressful situation.
What an investor should be:
A person who thinks long term.
Capital accumulation is a lengthy process. You need to be prepared for the fact that stocks can bring good dividends, and sometimes have zero profitability. Currency speculation and other dubious products have nothing to do with investment.
The investor understands the value of stocks.
The investor must clearly understand the connection with the business. Stocks are not chips, and investments are not a lottery. Here you need to clearly analyze the prospects of the project in which the money is invested. After all, improving the quality of the manufactured product will only increase profits, and hence the amount of investment.
Understanding the relationship between risk and return.
The investor is well aware that there will be no high profit without risk. But it’s also worth remembering that risk without perspective does not guarantee financial success. There are several world examples of startups taking off and bankruptcies of well-known companies.
Let’s go back to the beginning. Investing is not a profession; you don’t have to be a mathematician or an economist for that. Successful investing is based on a special worldview and a certain pattern of behavior. To become an investor, act now. Start saving wisely in order to get free funds. Don’t keep money under the mattress, make it work for you. Carefully select investment objects, do not expect instant results, and then financial success will definitely come to you. What do you think is worth investing in? Share your assumptions in the comments. Do you have investment experience? If not, what’s stopping you? Your opinion is important to us, so do not forget to rate our article 🙂