Types and classification of investments - Economic evaluation of investments

Types and classification of investments

In the domestic economic literature there are several approaches to the classification of investment.

Consider the classification of investments in accordance with the following generally accepted set of classification characteristics:

• the investment object;

• area of ​​investment;

• the form of ownership of the investment;

• the nature of participation in investing;

• investment period;

• The regional nature of the investment.

For & quot; investment object & quot; distinguish between the following types of investment.

1. Real (capital-forming) investments (they are sometimes called production or material), which include:

• investments in fixed assets;

• Investments in inventories of inventories.

Real investments are investments in real assets, both tangible and intangible (sometimes investments in intangible assets related to scientific and technological progress are characterized as innovative investments).

Real investments are made in the form of capital investments. Investing in real projects is a lengthy process. Therefore, when evaluating them, you must consider:

• Riskiness of projects - the longer the payback period, the higher the investment risk;

• the time value of money, because over time, money is losing its value due to inflation;

• The attractiveness of the project compared to other investment options in terms of maximizing revenue and increasing the company's share price at a minimum level of risk, since this is an important goal for the investor.

Using these rules in practice, an investor can make an informed decision that meets his strategic goals.

2. Financial Investments is:

• contributions to savings banks;

• Bonds;

• Shares;

• Money;

• Deposits.

Financial investments are understood as investments in various financial instruments (assets), among which the most significant share is occupied by investments in securities.

The allocation of real and financial investment is the main sign of classification. According to some authors, in primitive economies, the bulk of investment refers to real, while in the modern economy most of the investment is represented by financial investments.

The high development of financial investment institutions contributes significantly to the growth of real investment. Thus, it can be concluded that these two forms are complementary, not competing. An example of such a relationship in the field of real estate is the financing of construction of housing for rent.

3. Intellectual Investments include:

• Investments into scientific developments;

• Investments in training specialists;

• Investments in the social sphere.

The second & quot; investment area & quot; Investments are classified according to the field of activity in which they are sent. So, for example, for a construction organization that carries out capital construction, the following areas of investment can be identified:

Supply, ie. provision with building materials, machinery, transport, semi-finished products;

production, ie. directly carrying out construction work;

marketing, ie. sale of construction products either in the form of sales of the relevant building, structures, living space, or in the form of transfer to rent, etc.

By the third characteristic & quot; form of investment property & quot; are highlighted:

public investments, carried out by state authorities of various levels at the expense of corresponding budgets, off-budget funds and borrowed funds, and also realized by state enterprises and enterprises with state participation at the expense of own and borrowed funds

foreign investments - investments made by foreign legal entities and individuals, as well as directly by foreign states and international organizations;

private investments - carried out by private persons and enterprises of non-state ownership;

joint investments - carried out jointly by domestic and foreign investors.

Based on the & quot; nature of investing participation & quot; highlight the direct participation in the investment and indirect participation in the investment.

By direct participation in investing is understood as direct participation of the investor in the choice of investment objects and investment of funds. Direct investment is carried out mainly by trained investors who have fairly accurate information about the investment object and are well acquainted with the investment mechanism.

By indirect participation in investing is understood as an investment mediated by other persons (investment or other financial intermediaries). Not all investors have sufficient qualification for an effective choice of investment objects and their subsequent management. In this case, they acquire securities issued by investment and other financial intermediaries (for example, investment certificates of investment funds and investment companies), and the latest investment funds so collected are placed at their discretion - they choose the most efficient investment objects, participate in their management, and the received incomes distribute then among the clients.

Based on the & quot; investment period & quot; distinguish short-term and long-term investments.

Under short-term investments are usually understood as capital investments for a period of not more than one year (for example, short-term deposits, purchase of short-term savings certificates, etc.).

By long-term investments are usually understood as capital investments for a period of more than one year. This criterion has been adopted in accounting practice, but experience shows that it requires further detailed elaboration. In the practice of large investment companies, long-term investments are detailed as follows: a) up to 2 years; b) from 2 to 3 years; c) from 3 to 5 years; d) over 5 years.

The last characteristic, & quot; regional nature of investments & quot ;, assumes their classification into three groups:

investments abroad - investing in investment objects located outside the state borders of a given country;

domestic investments - investment of funds in the objects located in the territory of a given country;

regional investments - investment of funds within a specific region of the country.

Such a classification, allowing you to identify the main areas of investment, nevertheless does not take into account a number of specific features of the investment process, which have a significant impact on the assessment process. You can use for classification of investments and additional features:

• use in the investment process of limited resources - land, capital resources and personnel;

• scale of investment - investments in small, medium and large projects;

• the degree of exposure to the influence of other investments - independent investment; investments that require related investments; investments that are sensitive to the adoption of competing investment decisions;

• the form of obtaining an effect that depends on the investment objectives;

• the functional activity with which investments are most closely linked;

• Industry classification;

• The risk of investing;

• The degree of mandatory implementation - mandatory, not absolutely mandatory, optional.

The most widespread in the Russian economy was the classification of investments in direct, portfolio and other.

Direct investments - is an investment in this enterprise, the volume of which is at least 10% of the share capital of this enterprise. Portfolio investments are investments in securities of this enterprise, the volume of which is less than 10% of the share capital. Other investments are investments not related to the enterprise (investments in GKO, OFZ, etc.).

Another classification of investments is given in the book of LJ Gitman and MD John: "Investment is a way of placing capital that must ensure the preservation or increase of the cost of capital and/or bring a positive amount of income. Direct investment is a form of investment that gives the investor immediate ownership of a security or property. For example, when an investor buys an equity, bond, security or piece of land in order to save the value of money or get an income, he makes direct investment. Indirect investment is an investment in a portfolio, in other words, a set of securities or property values. For example, an investor can buy a share of a mutual fund, which is a diversified set of securities issued by different firms. Having made this purchase, the investor will not have requirements for the assets of a particular company, but shares in the portfolio. "

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