A financier who has invested money in a long-term project. The main principle of long-term investing

When choosing a method of income, increasing the profitability of production or business, it is important to take into account many investment options - their methods, differences, positive and negative aspects. What is investment and what is its role in the economy of various industries and the state as a whole is a pressing question in the modern world.

Investments - what is it?

As a rule, financial investments represent the investment of funds in any object or instrument with the aim of making a profit. In the case of an unprofitable project, investment funds are returned extremely rarely or not at all. What is investment? Such investments can be not only pure money. Often this is the purchase of shares or securities, ownership of an object, license or copyright, currency, precious metals. Sometimes investments are made in:

reconstruction;
repair;
maintenance or service of anything;
New construction;
upbringing or education.

The role of investment in the economy

Why are investments needed? Their rational use makes it possible to increase the level of development and its prospects for the most important sectors of industry, production or agriculture of the country. Investment allows you to maintain or optimize the number of jobs, improve the quality of products, improve trade turnover and create a reserve of financial assets for the subsequent implementation of planned projects.

It should be borne in mind that not every investment will be useful. Investing in an illiquid business in the absence of its optimization and modern or established production methods often does not bring the desired result. In such cases, investment may be low.

How to attract investments?

High-yield investments will always be more attractive to investors, but how to achieve the desired result? There are some aspects that affect the possibility of obtaining the required investment package:

conducting an open business in compliance with strict reporting of various types;
working on planning further actions, drawing up a development strategy, making every effort to comply with them;
a sober assessment of expected income and expenses;
presence of recommendations or positive reputation in the business field;
readiness for flexible cooperation;
favorable economic environment, investment climate and some government support.

Types of investments

The classification of investments deserves the attention of the future investor. There are several of them:

1. By investment period:

short-term investment – the period is usually less than a year;
medium-term investment – period from one year to 3-5 years;
long-term investment – often for a period of more than 3-5 years.

2. By territorial basis:

internal;
external.

3. By type of investment object:

direct or real - contributions aimed at the development of production or business;
portfolio or financial - they directly bring profit to the investor.

4. By type of investor participation:

indirect investment;
direct investment.

5. By volume of income:

lack of income, but at the same time the presence of social, environmental or other benefits;
short;
average;
high.

6. When taking into account the form of ownership, investments can be:

foreign;
joint with other states;
private;
government;
mixed.

Investments - where to invest money?

As a rule, making money on investments is the main goal of investors. The choice of industry for such investments may depend on the following factors:

investor preferences;
economic situation and the presence of promising areas;
characteristics of industries or businesses in the region;
amount of free capital.

Business Investments

Many people wonder how to make money on investments. The answer may be ambiguous. For example, when investing in business projects, it is important to consider a number of factors:

business profitability;
its stability;
development prospects;
possible risks.

Investing in shares

A common type of investment is the purchase of securities, but it is not always possible to achieve the desired result - there are some features of investing in shares. Their cost may vary depending on the economic situation. Operations require experience and skill. The disadvantages of investments include the fact that initially profits are distributed between credit institutions, employees and suppliers. Do not forget about the possible bankruptcy of the company and other financial risks.

Investments in startups

Investment and innovation are often inseparable. Currently, there are many talented developers and aspiring businessmen for whom it is important to find a stable investor. Not everyone is ready to invest their capital in a new, untested project, so there are huge risks of such investments. To find both a startup project and an investor, it is important to consider these risks and possible additional costs. Its subsequent implementation will also be useful.

Investing in Bitcoin

The goal of most investors is profitable investment, but it is not always possible to achieve the desired result. What is investing in Bitcoin, and how does it differ from investing in traditional currencies? is a virtual payment system, usually peer-to-peer, which is used for online payments between sellers and buyers, exchange for goods or services. Sometimes it is possible to exchange Bitcoin currency for regular money through specialized online services.

The issue of investing in Bitcoin is controversial, because the value of such a currency can change several times a day. Often such investments are long-term in nature. There is an opinion that they are advisable if there is free capital. There are examples of both profitable and unprofitable investing in bitcoins, so the choice in this case remains with the investor.

Investments in gold

It's rare to find a risk-free investment. Even the stable price of gold can be shaken due to the influence of external economic factors. There are some advantages of investing in gold reserves:

the metal is little exposed to external factors, so it can be preserved for a long time;
its storage does not require special conditions;
The influence of economic factors on the price of gold is not so great.

Investing in precious metals can be in the form of purchasing coins, bars, jewelry, opening metal accounts or brokerage trading. Like any type of investment, investing in gold involves certain risks that must be taken into account when choosing a financial asset.

Investments in construction

The growing pace of construction often makes it possible to call investing in this industry one of the most common investments of available capital. The objects of investment in this case are residential, industrial, industrial, and social funds. Housing stock is a popular segment for investment. Moreover, this applies not only to urban, but also to suburban real estate. There are a number of factors that determine this popularity:

The cost of square meters of housing stock in the early stages of construction is an order of magnitude lower than the price of finished housing.
Ready-made residential or non-residential premises are often available for rent, which brings certain benefits to the investor.
Under stable economic conditions, prices for secondary housing are rising, especially in areas with developed infrastructure.
Country real estate rarely loses value. An additional factor in the growth of housing costs can be the high probability of merging the territories of the city and the region.
In addition to rent, investments in a hotel chain are common, especially if the region is attractive to tourists.

Investments in agriculture

As a rule, investment goals are those tasks that an investor sets for himself when choosing an investment object. This is often for financial gain, but sometimes the objectives may be social or environmental well-being. What is investment for the agricultural industry?

This is an investment of funds for the construction and maintenance of livestock farms and agro-industrial complexes. The result of such investments depends not only on their volume and proper distribution, but also on the type of agricultural objects or crops, region, climatic and weather conditions.

There are some features of this type of investment:

The long waiting time for profit depends on the timing of crop cultivation, harvesting, processing and the possibility of export. A similar condition applies to livestock farms.
High risks – impact on the harvest of weather conditions, the presence of diseases of livestock or birds.
The need to update the fleet of agricultural machinery, introduce new technologies in crop and livestock production.

Understanding what an investment is and how a given financial instrument works is necessary to calculate the required costs and expected benefits. When choosing an object or asset for investment, it is important to take into account possible risks, financial and time costs that can accompany almost any type of investment.

Investing, that is, investing your own funds in any objects with the aim of making a profit, is a fairly common process today. If you raise your children correctly, then from childhood they will know that it is better to invest money in business than to store it in a piggy bank. But where to invest - this needs to be dealt with carefully. We will consider the types of investments depending on the investment period.

Saving for a rainy day was the most popular type of investment in the Soviet Union. From a scientific point of view, these are medium-term, low-risk investments. They are highly liquid, as money will be available at any time. However, such a nest egg practically does not generate income. Especially if it is deposited in rubles, which are constantly losing their value due to high inflation. A nest egg in dollars or other currencies can bring profit if the exchange rate is favorable. This is the simplest and most accessible example of investing.

There are a huge number of types and categories of investments. You need to study this topic in order to be well aware of the income your investment portfolio will generate. Ideally, any investment portfolio should be diversified. This means that it must contain financial assets with different risks and returns.

All investments can be divided into short-term, medium-term and long-term according to investment terms.

Short-term investments

Funds are invested for a period from several hours to one year.

Short-term investments include cryptocurrency trading. Playing on cryptocurrency exchanges today has become available to many users, many of them do not even think about the fact that this is an investment, treating it as a game that may or may not bring profit.

Another area for short-term investments is the area of Internet technologies (IT technologies). A large number of startups, ICOs and open access to a wide range of investors have made this type of investment very popular.

Investing in PAMM accounts also refers to short-term investments. In this case, the investor entrusts his funds to an experienced broker who opens a transaction.

It is impossible not to mention HYIPs as short-term investments. This is perhaps the most high-risk and unpredictable instrument. You need to handle it with the utmost care and invest only those funds that can be safely lost. Income in HYIPs from 1-50% per day.

In general, short-term investments most often involve high risks and high returns. You can invest any amount that you are not afraid of losing. The profitability and liquidity of such investments depends on where you invest your money and how great the risks are. Most often this is 3-20% of the invested amount.

Medium-term investments

Last from one to three years.

shares – ordinary and preferred
bonds, bills, other debt obligations
branches and subsidiaries
investment funds
non-current tangible assets of enterprises
bank deposits
real estate
precious metals
leasing, etc.

For that part of medium-term investments that are aimed at generating income, shares are best suited. However, those investors who do not want to independently study the market for shares and other assets most often prefer mutual funds. These funds offer clients instant diversification, which is especially important for investors with a medium time horizon.

The cryptocurrency market also did not remain aloof from the trend. Today, cryptocurrency investment funds are successfully operating on it, giving their clients the opportunity to make money on the market, without delving into the study of cryptocurrencies and without spending a lot of time on balancing the investment portfolio.

For example, the Rubus fund makes it possible to purchase fund tokens using smart contracts and, thus, receive part of an investment portfolio balanced in terms of risks and returns, which was compiled by professional financiers and analysts.

Investments in a cryptocurrency fund can develop from medium-term to long-term, since receiving a stable income is not limited in time. An investor can withdraw part of his funds at any time, or increase the number of tokens in his personal account.

Long-term investments

Money is invested for a period of three years.

Long-term investments are made in construction, durable intangible assets and various securities from which income can be generated. For the most part, this refers to investments that are characterized by fairly high stability, regardless of changes in the economic situation or fluctuations in the financial market.

For a long time it was believed that long-term investments were the domain of large enterprises or professional investors with large savings. Since small amounts cannot be a long-term investment.

However, today, all over the world, life insurance remains the most popular type of long-term investment for private investors. These investments are not only available to everyone, but are also highly valued by residents of developed countries; it is believed that this is one of the the most reliable types of investment of those available today.

For example, a large legal holding company with American jurisdiction offers its clients to enter into an insurance contract with possible protection from $100,000 to $5,000,000. Residents of Russia can also insure their lives, and they will receive detailed advice on the product and the opportunity to create a unique, high-quality personal financial plan.

Another common example is the acquisition of residential premises and buildings for commercial or industrial purposes with the purpose of renting them out for a long period of time, receiving a stable profit. Subsequently, when prices on the real estate market increase significantly, such an object can be sold at market value. Similarly, market prices may rise for securities.

Having become acquainted with all three investment methods, we came to the conclusion that each type is available to ordinary people who do not own millions, but are thinking about preserving and increasing their own funds. The main thing is to clearly understand the goal that needs to be achieved and choose ways to achieve this goal.

Be confident in your choice and join us in our

Every day we are faced with some rules. These are traffic rules, spelling rules, game rules, and so on. These rules were invented so that, by following them, you can achieve the desired result and avoid sad consequences.

In investments, there are essentially no rules that would be clearly stated in any code. Therefore, many beginners often learn them empirically from their own mistakes, which is not good and usually ends in financial losses.

In 2007, Ivan Ivanovich saw a bright advertisement for one of the mutual funds. The advertisement said that over the past year the fund earned 157% per annum. Having become interested, Ivan Ivanovich went to the management company. There he was shown a beautiful graph of the growth of the fund's value, described rosy prospects, and was told that the stock market was now growing very strongly, and that the MICEX index would soon exceed 2,500 points. Flattered by beautiful charts, high profitability and analysts’ forecasts, Ivan Ivanovich withdrew all his savings from the deposit and invested them in this fund.

But something went wrong... After a few months, the value of the fund began to fall. First by 10%, then by 20%, then by another 30%. When the value of the account dropped by half, Ivan Ivanovich could not stand it and sold everything at a loss. “Screw this stock market, I’d better put it all back on deposit,” he thought with resentment and anger.

In fact, Ivan Ivanovich made several of the most serious and common mistakes that beginners make: he invested all his money in one instrument, did not assess the risks, did not determine the goals and timing of investment, did not leave at least a little savings on deposit, and so on.

Nevertheless, there are several basic rules of investing, following which you will most likely be able to avoid the mistakes that Ivan Ivanovich made and achieve success in investing.

Rule #1. Decide on your goals and create a personal financial plan

If you don't know where to go, you won't get anywhere - this phrase best describes why you need to figure out your financial goals first. Before you start investing, you must decide for what purpose you will invest. These can be completely different goals: saving for retirement, buying real estate, education for children, buying a car, traveling, and so on. Any goals you want to achieve that require money.

How to set goals correctly?

You can say - I want a house. But this is not the goal yet. After all, it is completely unclear what kind of house it is, has it already been built, ready and for sale or is it yet to be built, what location it is located in, how much money is required, when you want to start living in it, and so on. The goal must be clear and precise; at a minimum, three things must be determined:

make a detailed description of the goal
determine the cost of the goal
determine the desired time frame for its achievement.

For example, a goal may sound like this: a brick two-story house in the village of Zarya, worth 7,000,000 rubles in 5 years.

It’s a little more difficult if the goal is passive income. Let's say you decide that your desired passive income per month is 100,000 rubles. Of course, passive income does not fall from the sky on its own; you need assets that will generate it. For stable income, assets must be placed in reliable financial instruments with fixed income. Now such instruments bring about 6-8%. 100,000 rubles per month is 1,200,000 per year. To receive such an amount in the form of interest, the amount of capital must be 15-20 million.

In fact, in reality the capital should be even greater, since if you plan to receive income for many years, then due to inflation its purchasing power will decrease, and next year you will no longer need 100,000 per month, but for example , 106,000. Therefore, some part of the capital should be placed in financial instruments that are capable of generating high income, for example, shares, so that the purchasing power of capital does not fall.

Speaking of inflation. If achieving a goal is greatly delayed, then in the future, due to inflation, its cost may increase significantly. Therefore, when planning financial goals, you need to calculate future goal cost. You can read how to do this in the article.

How to achieve financial goals?

To achieve financial goals, it is being developed. Once you have decided on your goals, you should have a list of them, indicating the cost and deadline for each goal. If there are many goals, then it is not a fact that you will be able to achieve them all. Therefore, goals need to be prioritized and the most important ones given priority.

What's next? You need to decide how to achieve these goals. This is exactly why a personal financial plan is drawn up. Investing without a financial plan is like going into the woods without a map or compass.

In order to draw up a plan, you need initial data. The work begins with an analysis of the current financial situation, the value of assets and liabilities, income and expenses. This will help you take a broad look at the scope of your financial capabilities, find hidden financial reserves and discover vulnerabilities.

You will find out the amount of your capital, the amount of cash flow that will make up your investment potential and other things. This is something without which it is impossible to make a plan, and therefore achieve goals.

For example, you may suddenly find that a significant portion of your money is being wasted, which you previously did not notice until you started managing. Or that a garage that you haven’t used for a long time can be sold or rented out, generating additional income.

By doing this work, you will lay the foundation on which the house of your financial future will be built.

Rule #2. Create a financial safety net

You can’t invest without having something “just in case.” Every incident always arises unexpectedly and at the most inopportune moment, when you are not expecting it at all. This could be loss of a job, illness, expensive medical care, breakdown of expensive equipment that you cannot do without, large unforeseen expenses, and so on.

An investment portfolio cannot serve as a financial cushion. Its goal is to increase money, and its value can fall significantly. Most often, the need to get into a stash arises during a crisis. By using a portfolio as a reserve, you risk getting into a situation where you urgently need money just when the value of the portfolio decreases, and you will have to sell your assets at a loss.

By the way, this can also be called time diversification. Because investing money does not happen at one moment, which may turn out to be unsuccessful, but at regular intervals.

Rule No. 8. Reduce costs

Imagine that you invested 100,000 rubles in an index fund whose average return over 20 years was 15% per annum. In 20 years, 100,000 will turn into 1,423,177 rubles. Now imagine that you invested the same 100,000 rubles in the same index fund, but which charges an annual commission of 1%. In 20 years, 100,000 will turn into 1,175,784. Just 1% commission over 20 years ate up 21% of profits!

Therefore, one of the most important tasks of a long-term investor is reducing your costs .

You don’t need to go far for an example. Let's take the U.S. Opening Fund, which invests in the American ETF iShares S&P 100 ETF. The costs of the mutual fund are: remuneration of the management company 1.9%, remuneration to the depositary 1.5%, other expenses 0.5%. In total, a mutual fund can charge up to 3.9% annually. And this does not take into account surcharges and discounts.

As for the iShares S&P 100 ETF itself, it charges a commission of only 0.2%. Such a difference cannot but affect the dynamics of funds. Since 2013, the Otkritie mutual fund has lagged behind the ETF by 20%.

When trading independently, commissions also play a role and can vary greatly between different brokers. In addition to the “classic” trading commission for a transaction, a broker may charge a fee for maintaining a securities account, a fixed subscription fee, for a trading terminal, for submitting bonds to an offer, and so on.

Rule #9: Take advantage of tax breaks

The only thing worse than commissions are taxes. They take away 13% of your profits. If you earned 20%, after taxes, it turns into 17.5%. There are several ways for an investor to avoid taxation through tax benefits.

Individual investment account

Since 2015, every citizen of the Russian Federation can open an account with a preferential tax regime. An IIS can be opened with a broker or management company. You can use it to purchase securities traded on Russian exchanges, currency, shares of mutual funds, or give money to trust management. The minimum investment period for an IIS is 3 years; in 1 year you can deposit no more than 400,000 rubles. There is no possibility to withdraw money from an IIS without terminating the contract.

There are two types of IIS - with a deduction for contributions and for income. The first type allows you to return the personal income tax paid by the taxpayer in the amount of 13% of the amount deposited into the IIS for the year. Thus, with a ceiling of 400 tr. the maximum deduction amount will be 52 tr. (but not more than the paid personal income tax amount). The second type allows you not to pay income tax when closing an IIS. In most cases, with a short investment period, a deduction for contributions is beneficial. But as the period increases, income deduction becomes more preferable.

Long-term ownership of securities

You can also avoid paying income tax if you hold securities for more than three years. This is called the tax benefit for long-term holding of securities. The benefit is valid for securities traded on an organized market and for shares of open mutual funds acquired after January 1, 2014. Having held securities for more than three years, the investor receives the right to a tax deduction in the amount of income received, that is, his income from the sale or redemption of securities is exempt from taxes.

A maximum amount has been established for the deduction, which is calculated using the formula N x 3 million rubles, where N is the number of full years of ownership of the paper. This benefit does not apply to securities purchased through an individual investment account.

Balancing losses

The investor has the right to offset losses from previous years with profits and return taxes. For example, if you made a profit over the last year, and a loss last year, then you can balance the loss of previous years with the profit, thereby reducing your tax base, and receive a tax deduction.

For example, in 2014 you received a loss of 500,000 rubles, and in 2015 a profit of 300,000 rubles. Your tax for 2015 was 39,000 rubles. You can return it in full, since the loss for 2014 fully covers the profit for 2015. The remaining 200,000 rubles of the unbalanced loss can be transferred to the profit of future periods.

To receive a deduction, you will need to request a 2-NDFL certificate from the broker for the profitable year and a certificate of losses. Next, you need to generate and submit a 3-NDFL declaration to the tax office along with documents and an application for deduction.

Other tax deductions

In addition to investment deductions, there are others that should not be forgotten:

A standard tax deduction that can be received by citizens of the Russian Federation with a certain status (disabled people, blockade survivors) and parents with children.
Property deduction for the purchase or construction of housing.
Social deductions for education, treatment, charity, and expenses for creating a pension.
Professional deductions to which individual entrepreneurs, lawyers and notaries are entitled.

Investing Unit-Linked

is a method of foreign investment, which is issued in the form of an insurance policy. This makes it possible not to declare your income annually, but to pay tax only after the policy is closed. In addition, the legislation provides for a preferential tax regime: tax is levied not on all profits, but only on income received in excess of the refinancing rate that was in effect during the policy period.

Rule #10: Don't play the guessing game and focus on the things that really matter.

Behavior of the average investor

Where to invest money next year? What will the dollar exchange rate be in a month? What will happen to oil prices? Should you buy gold now? What will happen to the markets after Brexit and the Trump election? Ordinary people regularly ask themselves such questions, trying to guess what will grow.

In fact, in the long term, this is just news noise that is not worth paying attention to. In most cases, such an attempt at a guessing game does not bring good results, since there is very little chance of guessing correctly on a regular basis.

People are not ready to wait, but want to get everything at once. Seeing that the idea did not work, they immediately begin to look for another. This usually generates a whole zoo of different assets.

Another problem is investor behavior. Unfortunately, our brain is designed in such a way that it forces us to buy when everything has already risen and sell when everything has already fallen.

According to Richard Bernstein Advisors, this behavior has caused the average investor to perform significantly worse than most of the assets in which they invest over the past 20 years. If he had simply bought and held them, the results would have been better.

First of all, the result of your investments is determined not by the choice of individual promising ideas and not by playing on market fluctuations, but distribution of assets in the portfolio and investment strategy .

Instead of trying to guess the right moments to sell and buy, focus on developing and following your investment strategy, reducing costs and tax burden. There is a high probability that this, and not the pursuit of hot ideas, will bring you success in investing.

Placing money for a long term with a profit is based on serious analysis, intuition and consideration of all factors that affect changes in the initial value. Taking into account long-term investments will help you optimally build a strategy with minimal risks.

Maximum efficiency

How to create a competent strategy, and which assets will show stable, albeit small, returns.

Facts to Learn to Get Stable and Reliable Effectiveness long-term investments:

Study the competitive ability of the shareholder; this requirement primarily concerns investments in the construction and acquisition of land, as well as in the securities of manufacturing enterprises.
The price of the shares of interest is the market average. For first-time investors, estimating the average price is difficult because stocks do not have a valuation rate. Such input requires analysis of annual growth and decline graphs in order to form a picture of the competitiveness of a given facility.
Long-term investment in stocks must be based on a favorable relationship between the current value and the average price over a year or two.

Important. Investments for a long period pay off no earlier than in 6–7 years.

Prospects and benefits of long-term investment

Projects that do not bring immediate profit are designed to minimize risks, so the rate of return on such products is low. However, with a successful choice of object, you can get a lot of income.

The advantage of placing money for a long period of time:

Long-term investment financing guarantees a stable, albeit small, but constant income.
The money is paid back more than once, and the investor can be sure of the return of a large amount with interest.
Profit from such investments does not come instantly, but since the amount is circulated more than once during this time, the income from turnover increases.
Having invested a large amount for a considerable period, you do not have to worry about sharp fluctuations in value associated with political and natural factors.

Long-term investing in stocks means stable additional income. In some cases, it is advisable to purchase a package that will allow you to manage an enterprise or production.

Disadvantages of long-term financing

Investing assets for a long time has certain disadvantages:

In this case, you can’t count on a quick return and receiving additional income.
There is a possibility of losing money invested, at first glance, in an interesting project. Owners do not always know how to properly develop and manage their business.
Even careful selection of industries does not exclude the possibility of loss of liquidity.
Government guarantees do not apply to the financial market and cover funds only in the banking sector and only up to a certain amount.

Therefore, experts recommend dividing long-term financing of selected investments into several different products. The popular wisdom “don’t put your eggs in one basket” is completely justified in this case.

Areas of profitable investment

Popular projects are characterized by low profitability, but greater reliability.

Securities, shares - investing in industry and production is a reliable option for placing capital, since enterprises usually have collateral that covers the risks of investors. An analysis of promising industries will help you select several promising areas. It is better to choose several different directions to minimize losses.
If we take into account that long-term investments allow, over time, to buy out a controlling stake in the enterprise, then such strategic investment makes it possible to become the owner of the enterprise. But such a strategy can be justified if the investor is familiar with the work of the company and knows its problems and shortcomings from the inside. You must have a large amount of information, sometimes even obtained through illegal methods, in order to buy out a controlling stake.
Real estate and construction. If two years ago such an investment was fully justified, but recent trends in the field of construction services show that such financing today is mostly unprofitable. Planning for such long-term investments is impossible due to the high interest rates on loans, which causes the bankruptcy of many construction contractors, and the decrease in purchasing demand causes the idleness of finished buildings intended for rent. Sales of finished apartments also decreased due to an increase in mortgage lending rates;
Transport and special equipment are a popular area. You can make a good profit. Vehicles are available for leasing, and equipment and machinery are available for rent. The investor receives double income - rent and sale of worn-out equipment that has paid for itself. The only disadvantages of this investment include the costs of repairs and components.
The effectiveness of long-term direct investment in the production of goods and technologies requires deep professional knowledge of the industry and a professional analysis of the competitive ability of a particular production.
The acquisition of a plot of land or industrial facilities in the agricultural sector in the future is considered profitable, but also risky, as it is associated with irresistible seasonal factors that directly affect profits. It is necessary to focus on the concept of regional development and the characteristics of the chosen industry.

It is important to note that building a portfolio of different financial products significantly reduces the possibility of losing money, since it includes several different areas of capital allocation.

Planning a portfolio of long-term investment areas is optimal for a beginner. A portfolio can be formed from low-profit but stable products and a small percentage of bold projects with a large percentage of income.

Long-term investing - what is it, and who can benefit from this method of working in the stock market? Before answering these questions, we must briefly review the two main approaches.

The first is speculation, short-term trading of stocks, commodities and currencies with the aim of generating speculative income. A speculator must be able to predict changes in asset prices in the short term - a couple of minutes, hours, several days or weeks. This usually limits the speculator's investment horizons. Indeed, he should not be in a position for a long time: he saw the potential for growth or decline, entered the market, “ride” the trend and exited. At first, when people first see a graph, it seems simple to them. Here I opened a position, then closed it and received income. On the historical chart, everything seems quite obvious. But in practice, everything is much more complicated - short-term price fluctuations are very chaotic. Sometimes professionals call this a “hot” market, since any news, any statement from high-ranking officials, any technical breakdown of levels, any financial event affects the price of the asset. A speculator must always be aware of all ongoing processes; as they say, he must be in the market. This always requires significant time investment in analyzing the current market situation. The main advantage of speculation is the high potential profitability. Most people involved in short-term trading expect to earn a return of 50% per annum or more, sometimes significantly higher. Speculation is primarily suitable for those who are willing to take significant risks for greater profits.

Now let's look at the second approach - long-term investing. This means buying shares with a long-term investment horizon - a year, two, three or even more. What comes first is not the stock price chart, but the company behind the security. In the long term, the market is called “cold”. The explanation for this is that short-term price-moving news cancels each other out and the company's fundamentals come to the fore. The main principle of long-term investing is business growth, stock growth and company losses, as a result of which the stock price decreases. Of course, this also has its difficulties, and one must correctly assess the current state of the business, as well as be able to correctly predict its development. But the plus is that you will have much more free time for this, since the investor makes a small number of transactions. As for potential profitability, as a rule, investors focus on income of about 20-30% per annum in the long term. Here it is necessary to clarify that stocks do not grow linearly. A security can be sideways for several years, and then grow several times. There are many examples of similar situations on the Russian stock market:

Polyus Gold

Moscow Exchange

A long-term investor must be patient and wait for the shares he bought to grow. First of all, he should be interested in what is happening with the business, since this is a determining factor in changes in stock prices in the long term.

Long-term investing is more suitable for people who do not have a lot of free time and want to receive income from their assets greater than a bank deposit.

In order to start investing, as in any other business, you need to start with education and learn the basics of fundamental analysis. This is an analysis of the financial condition of the company, an assessment of the value of the business and the prospects for its development. You also need to study the experience of the most famous and, most importantly, successful investors in the world.

First of all, this is Warren Buffett - the third richest person and the best recognized investor in the world. Next come Philip Fisher, Peter Lynch and Jim Rogers. You need to get acquainted with the books, thoughts and advice of these people, study the features of analyzing company financial statements, since without this you will not be able to assess the financial condition of the business. And then - practice, practice and more practice.

When one of the students asked Warren Buffett how to learn all this, Buffett replied: “Start with the letter A.”

The advantages of long-term investing are that most large companies traded on the Moscow Exchange are undervalued from the point of view of fundamental analysis. Yes, our economy is going through difficult times now, but there have been, are and will be crises. For every downturn there is an upturn. The stock market is a reflection of processes occurring in the economy. Since our economy is still far from developed economies, the stock market has significant growth potential, and therefore the growth potential of your investments in the long term.