A. Definition of Investment
Investment is a term with several understandings related to finance and economics. The term is related to the accumulation of a form of activity with an expectation of obtaining future benefits. Sometimes, investment is also called capital investment.
From the definition of investment there are 4 important components that must be known in each investment:
- Funds / Assets. To be able to make an investment there must be an element of availability of funds (assets) at the present time. You certainly cannot buy a house if there are no funds. Even if you owe it, you need an asset guarantee.
- Every investment needs time to increase its value. If you expect the value of your investment to increase quickly, generally not the investment you make but speculation.
- Power / Mind. You must be willing to spend energy to be able to provide the best returns. There is no other way to maximize profits unless you want to try to learn to invest properly.
- All investors expect future profits. However, there is no guarantee at the end of the specified period that investors will find their assets are greater than when they start investing. This happens because during the waiting period there are events that deviate from what is expected. This is what is called risk. Thus, in addition to having to commit to binding funds, investors must also be willing to bear the risk.
B. The form of Investment:
- Land investment, expected by increasing population and land use; Land prices will increase in the future.
- Educational investment, with increased knowledge and expertise, expected job search and greater income.
- Stock investment, it is expected that the company will benefit from the work or research.
- Foreign currency investment, it is expected that investors will benefit from the strengthening of foreign exchange rates against local currencies
C. Investment Function:
The investment function is to buy capital goods and various production equipment that aims to be able to replace or add capital goods in an activity or economic activity that will be used in producing goods and services.
D. Investment Objectives:
- To get a fixed income in each period, namely, among others, interest, royalties, dividends, or rent and so forth.
- To form a special fund, for example funds for expansion purposes, social interests.
- To control or control another company, through partial ownership of the equity of a company.
- To guarantee the availability of a raw material and to get a market for the products produced.
- To reduce competition between similar companies.
- To maintain relationships between companies.
E. Types of Investment:
- Type of Investment based on its Assets
This type of investment is based on its assets, namely investment classification in terms of aspects of capital or wealth. Investment based on its assets is further divided into two types, namely as follows:
- Real Asset, namely tangible investments such as buildings, vehicles and others.
- Financial Asset is a document (letters) an indirect claim from its holder against a real activity of the party issuing the securities.
2. Type of Investment based on its Influence
This type of investment, according to its influence, is an investment based on a factor that influences or does not affect an investment activity. This type of investment can be further divided into two types, which are as follows:
- Autonomous Investment is an investment that is not influenced by the level of income, which is speculative. Examples are the purchase of securities.
- Induced investment is an investment that is affected by an increase in demand for goods and services and in the level of income. Examples of this investment are transitory income, which is an income earned other than work, such as interest and so on.
3. Type of Investment based on the Financing Source
This type of investment based on funding sources is an investment based on the origin of the investment obtained. This type of investment can be further divided into two types, namely investments originating from foreign capital and investments derived from the domestic capital.
- Type of Investment based on its form.
This type of investment based on its form is an investment based on a way to invest. This type of investment can be divided into two types, namely as follows:
- Portfolio investment is done through the capital market with securities instruments, for example in stocks and bonds.
- Direct investment is a form of investment made by building, buying, or acquiring a company.
F. Investment Benefits:
- Can be a long-term income potential
- Can outperform inflation
- Can provide a fixed income
- Can adjust to a change in needs
- Can invest according to your financial situation
Investment has a lot of benefits for business people and companies so that the business they run is developing and advancing.
G. Ways to Make Profitable Investments:
1. Choose Investment As Needed
Before investing, consider what your goals are when investing. Are these goals for the short, medium or long term? If the goal is short term, it’s good to invest in stocks. It’s different if it’s a long-term investment goal, which is the purpose for preparation or provision in old age.
In addition, identify the risks of each investment product. For example, stocks with high risk values. However, the level of profit offered is also quite large. If you are a risk taker, place funds in risky investments. Conversely, if you are still a beginner, it is better to invest in safe instruments, such as deposits.
2. Start Investing with Small Capital
Many people assume that investment must begin with large capital. This is certainly not true, considering that investment can begin only with a capital of Rp100 thousand. With this small capital, you can already be called the owner of the company because it has invested in the company.
Small capital investment can grow to be large if you are serious about pursuing the world of investment. Understand every stock movement and learn stock knowledge intensively to reduce losses in the future. Also learn from senior investors who are more experienced in their fields.
3. Choose Low-Cost Investment
Profits gained from investments will not necessarily increase the balance of investment. Because, every time a cash withdrawal, the customer will be charged an administrative fee, aka deduction. Every securities company has a fairly diverse discounting fee. Therefore, investigate which securities offer low-cost investments. That way, the benefits obtained are also more optimal.
Whatever investment you choose, observe the rate of growth as often as possible. This will also help when you want to make a decision when investing. For example, whether you want to continue in the investment product or even move to another investment instrument.
4. Placing Funds into Several Investment Instruments
Investment instruments are not only limited to stocks. There are also mutual funds, deposits, gold, property, and others. Each investment product has its own advantages and disadvantages. Likewise with the level of investment growth.
In order for an investment to provide maximum results, never focus on just one investment instrument. We recommend that you put funds into several investment products that are profitable and certainly resistant to significant economic growth rates.
5. Choose Investment that is immune to inflation
There are several investment instruments that deserve to be chosen. Call it mutual funds, bonds, stocks, deposits, property, foreign exchange, and gold. However, not all investment instruments are immune to the rate of inflation. That is, the value invested will decrease, especially if the company experiences an economic downturn during the inflation period. Therefore, look closely and find out in depth the existing investment instruments.
Are you interested in investing? Hopefully, this article helps you to succeed in investing. Thank you for the visit, see you in the next post.