Notes

Crypto trading


What are investments for?

What is an investment?

In simple words, this is the process of saving and increasing money by investing it in various assets that can generate income. As they say, money should work, and its main property is that money can make money.

Sometimes it can be extremely unprofitable to keep hard-earned funds "in the money" since in this case the savings will be slowly devalued by inflation. Moreover, as practice shows, inflation can not only be a sluggish process, but at some points sharply increase or, as they say in the financial environment, gallop.

Investment criteria

When talking about investment objects, you need to understand that, in addition to profitability, investments have a number of other important parameters, such as risk, liquidity, and capital intensity. Moreover, these parameters may also change from time to time.

If profitability and risk are intuitive parameters, then liquidity and capital intensity should be analyzed in more detail.

Liquidity is the ability to quickly and without losing profitability both make investments and extract them. And indeed, this is important, because money may be needed here and now at some points in time. And, for example, to sell an apartment (bought for an investment purpose) without losing profit, it may take more than one month. Alternatively, withdrawing a deposit before it is completed may result in a loss of interest, which reduces the overall return on investment.

Capital intensity is the size of both the entry threshold for certain investment assets and their maximum limit. For example, to make an investment in an existing business, you need a number of millions, and an excessive infusion of money may not yield results, since you can only "wrap" certain amounts within the framework of a certain business model of the enterprise. And "hyper money" will already require additional expansion, which is not always possible.

Speaking of risks, it is worth noting that they may increase from time to time. So, for example, buying real estate in a crisis at the "pit" stage can be riskier, since construction companies can also go bankrupt, and waiting for another developer to buy out this pit can be delayed. Even deposits in bank deposits during the license revocation period can occasionally "add adrenaline" to an investor's life.

Yield is a more volatile parameter, which, as time and the real estate market show, can sink, and the US dollar can decline against the ruble. But in the process of investing, there is a wonderful acquired property — experience and development of financial literacy. An active investor begins to understand economic realities more and more and begins to choose and manage their investments more and more correctly.


Investment objects

If you answer the question of what is meant by investment, the answer is — investing money in investment objects in order to make a profit. And these objects have different properties. Let's analyze the main investment objects.

Bank deposits are probably the most traditional investment object with a yield comparable to key rates. The advantages include accessibility, clarity, and convenience. The disadvantages include low profitability, which does not save from inflation, low liquidity (penalties for early withdrawal), as well as inelastic conditions. If inflation" suddenly " increased, then the interest on the deposit remains the same, and to transfer to another (more profitable deposit), you need to withdraw the existing one (often with a loss of interest). And the fact that the risks of the banking sector in times of crisis usually increase.

Buying a property is considered one of the most reliable investment operations, but this is not always true. This is usually said because buying real estate implies a long investment period, and it is not a fact that real estate shows better results during this period (and everything is learned in comparison). One of the advantages is that, for example, no one will take away the license from the apartment — this is your property. Real estate can be rented out and also receive income, and then passed on to your children. Among the disadvantages, we can note low liquidity, time spent on transactions of this kind (pick up a decent object is not easy), relatively high cost, and the fact that the real estate market can also experience drawdowns. Also, do not forget about the need for specialized knowledge in this area.

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