Classification and structure of investments

Investments

Every year the sphere of financial investment becomes more and more popular, however, it should be noted, that many investors start their way unprepared and they learn only from their own mistakes, losing their money and often even losing their business. Most frequently, it happens because of insufficient theoretical preparation, the important parts of which are the classification of investments and their structure.

By investment, we refer to the investments of money in entrepreneurship and any other sphere of activity for making a profit from this investment.

Learning the classification of investments

There are many classifications of investments, but we should look through the main of them:

  1. The classification of investments according to an investment objects.
  2. The classification of investments according to the process of placement of funds.
  3. The classification of investments according to duration.
  4. The classification of investments according to forms of ownership.

According to an investment objects investments are divided into financial and direct ones. Direct investments are directly invested in tangible or intangible assets, for example, in the immovable or intellectual property. Financial investments mean investing in different stock exchange instruments, for example, in shares of large companies or commodity futures.

The next classification of financial investments means their division based on participation of an investor in a placement of funds. If an investor participates in this process himself, then such investments are called direct. If funds are placed by an intermediary – then investments are called indirect.

Also investors divide their investments into short-term and long-term ones. Long-term investments are those, payback period of which is more than a year. Short-term investments are those, which are paid off in less than a year. The classification of the long-term investments, in its turn, involves creating intangible assets, buying a land plot, investing in a capital construction.

According to forms of ownership, capital investments are divided into domestic, foreign, private and joint investments. The classification of the foreign investments has a similar structure.

The structure of investment

Since there are many forms of investments, we should distinguish the structure of invested capital, the structure of real investments and the structure of financial and portfolio investment.

The general structure means a correlation of real and portfolio investments. The real investments represent the set of investments in the fixed or working capital and in intangible assets. The portfolio investments represent a sum of investments in different financial instruments, such as shares, bonds, commodity contracts.

Having learned the classifications, an inexperienced investor will better orient in this sphere, so, it means, that he will reduce the risk of losing his own capital investment.


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