Today, we will mainly explain the classification and types of investments, and provide a brief knowledge of the classification and types of investments, so that you can have a more holistic knowledge and understanding of investment tools in your financial management.
An investment is another asset acquired by a financial firm that gives up its assets to another entity in order to increase its wealth through distribution or to seek other benefits. The concept of investment can be understood from the above three points.
First, investment is another asset acquired by ceding assets to other entities. For example, a financial enterprise may use cash to buy shares or bonds issued by other units or may use fixed assets or intangible assets to give up to other units for use in exchange for equity investment.
Second, the economic benefits added by an investment are different from those arising from other assets other than the investment.
The increased economic benefits from investments are not generated by the financial enterprise's own operations but are obtained by transferring the asset to other units for use and distributing the income created through the use of that asset by other units.
Financial enterprises may also use investments to send business relationships, etc., for the purpose of obtaining benefits.
Third, investment income earned from investing in short-term marketable securities is essentially capital appreciation.
The difference with the second point is that short-term marketable securities investments are made by buying and selling securities at a low price and selling at a high price, and this income from the spread is an appreciation of the original capital invested.
According to the length of the investment recovery period, investment can be divided into short-term investment and long-term investment; according to the degree of involvement of investment behavior, divided into direct investment and indirect investment; according to the different directions of investment, divided into internal investment and external investment.
Short-term investments refer to those with a payback period of less than one year; long-term investments refer to those with a payback period of more than one year.
1. Classification according to the payback period of investment
According to the length of the investment recovery period, investment can be divided into short-term investment and long-term investment.
Short-term investments refer to investments with a recovery period of less than one year, mainly including cash, receivables, inventories, short-term marketable securities, and other investments; long-term investments refer to investments with a recovery period of more than one year, mainly including fixed assets, intangible assets, external long-term investments, etc.
2. According to the degree of involvement of investment behavior
According to the degree of involvement of investment behavior, it is divided into direct investment and indirect investment.
The direct investment includes internal direct investment and external direct investment, with the former forming various assets directly used for production and operation within the enterprise and the latter forming various equity assets held by the enterprise, such as holding shares in subsidiaries or associates.
Indirect investments refer to investments in which funds are indirectly transferred and delivered to the investee through the purchase of financial instruments issued by the investee, such as the purchase of stocks, bonds, and funds issued by the enterprise to the specific investee.
3. Different according to the direction of investment
According to the direction of the investment, it is divided into inward investment and outward investment. From the perspective of enterprises, inward investment is project investment, which refers to a kind of investment formed by enterprises putting funds into acquiring fixed assets, intangible assets, and other assets and advancing working capital for the production and operation of the enterprise.
External investment is an investment that occurs when an enterprise invests funds in order to purchase marketable securities or other financial products (including futures and options, trusts, and insurance) issued by the state and other enterprises, or injects funds into other enterprises (such as associates, subsidiaries, etc.) with monetary funds, physical assets or intangible assets.
In the process of investing, it is important to be fully informed in order to protect your interests from losses, not to engage in blind financial management, and to allocate your own funds wisely is the key to financial management.