Types of Investments and Classification

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It is worthwhile to understand that in order to make the right choice among a multitude of investment objects, it is necessary to at least get to know if not all, then at least the main types of investments.

what are theĀ investments?

All investments are considered from the point of view of sources of income, degree of risk, the origin of capital, subjects of investment and from the position of application and distribution of profits and so on.

Therefore, the classification of investments includes several basic schemes

Types of investments depending on the investment object

  1. Capital – investments for the acquisition of (main) fixed assets: buildings, structures, land, as well as assets for long-term use.
  2. Portfolio – expenses on the purchase of securities and currency.

This classification exists in another version.

  1. Real – when funds are invested in existing physical or intangible objects (trademarks, advanced training of employees, purchase of equipment).
  2. Financial – when investing money in securities, lending, leasing and leasing property, trade-in.
  3. Speculative – funds are invested in currency exchange or a trading platform.

There is a very thin line between financial and speculative investments, and therefore the three-level classification actually duplicates the first option.

By purpose of investments

Classification resembles the division of objects, but its essence is different.

  1. Direct – investments in real-life facilities and business development.
  2. Portfolio – investments in securities and the formation of an investment portfolio.
  3. Intellectual – investments in patents, brands, advertising.
  4. Non – financial – investments in copyright and intellectual property (inventions).

Types of investments by periods (conditional classification)

  1. Long-term – are made for a period of a year or more.
  2. Short-term – carried out for small periods of time up to 1 day.

By the nature of participation in the investment process

  1. Direct (active) – the investor directly takes part in the investment process, investing his money and having the opportunity to choose the investment object.
  2. Indirect (passive) – carried out through intermediaries, the investor does not select the investment object.

By ownership of capital sources

  1. Private
  2. Foreign
  3. State
  4. Mixed.

By resource source

  1. Internal – investments are made within the state.
  2. External – investments are made abroad.

By directions

  1. The main ones are the classic types of investments in capital, securities, objects of intangible assets.
  2. Alternative – those types of investments that affect the areas of liquid and highly profitable areas. Alternative investments include venture capital, investments in hedge funds, precious metals, cryptocurrencies, options, startups and so on.

By origin of capital

  1. Primary – own funds and savings taken on business loans, loans.
  2. Reinvestment (repeated) – funds received directly in the process of investing.
  3. Disinvestments – withdrawn from the accumulation turnover with the aim of investing in other objects.

Types of investments By risk

  • Risk-free (conservative) – usually this is a long-term investment in real estate, bonds, precious metals, investment coins, antiques, government contributions.
  • Medium-risk (conservative) – stocks, bonds, mutual funds.
  • High risk – alternative investments and exchange investments.

The higher the risk, the more profit you can get from investments.

Types of investments By Liquidity level

  1. Highly liquid assets – stocks, real estate, currency, gold.
  2. Medium and low liquidity – movable property, secondary securities, real estate.
  3. Illiquid – a rare currency, unique startups, property that has lost its current market value.

According to the form of accounting

  1. Gross – costs of organizational business processes are taken into account.
  2. Net – only the sums of investments are taken into account.

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