It is known that there are direct and portfolio investments. But what's the difference between these concepts? Let's try to figure out these terms and explain them simply.
What is the difference between straight and portfolio investments
Once this idea of the investments in the enterprise was about this: each owner or director dreamed of finding an investor sponsor for himself, who would give money and did not ask what they are in the end spent.This is, of course, a joke, but with a fraction of truth. In a literal understanding, direct investments are such investments, when an investor can be said, it becomes a significant share in the enterprise and claims to participate in its management. That is, what the money is spent, he asks, and controls the process itself.
Not always direct investments are made by money. For example, Coca-Cola puts brand and recipes in joint ventures. And McDonalds, opening new restaurants, promotes its technology of fast food.As already, probably, direct investments are individual. Most often we are talking about a direct arrangement between those who give money and business. It can be said that direct investment is the direct participation of the investor in the project.
With direct investment, we are dealing literally at every step. Suppose a neighbor decided to open the car workshop or a simple tireage, asked for money, and ready, the one who gave them became a direct investor on certain conditions.
Almost every future large enterprise begins with something small, from the first steps. As, for example, Apple and μicrosoft started in the garage, and Facebook and Twitter are in the student hostel. At some stage, all these minor companies attracted direct investments. And then they grew up and became the leaders of their industry.The most interesting thing is that those people around who appreciated the idea in time, became billionaires, correctly making bets. This is the biggest possible income in our time - to be at the right time and in the right place, invest money in the future industry leader, the recorder of those or other innovations changing our lives.
Portfolio investment
Portfolio investments and more difficult, and at the same time, much easier than direct investment. They are made at a later stage of business development, when attracting funds for its maintenance has already been delivered, it can be said to stream, and relationships with depositors are standardized.
The prospectus of the issue of shares is a kind of standard collective agreement on attracting funds. All those who buy the manufactured paper acquire the same rights.
The dream of business management comes true: they come sponsors that give money and only indirectly can influence what is happening. And ask what money spent is spent, almost can not at all. Is that to vote by the ruble - to sell securities if they are not satisfied with the business management.
Buying ordinary shares gives investors the right to participate in business management through the General Meeting of Shareholders. But it is unlikely that it is really interesting to anyone. At least as long as the current management copes with its responsibilities.
But this does not mean that shareholders at all do not affect the company. If the company works badly, his shares are cheaper, someone comes to buy a whole business whole, acquiring securities on the market. And this is a direct path to replacing not a competent manual.Environment of direct and portfolio investment
Often a clear boundary between straight and portfolio investments may not exist, and one type of investment is quite capable of flowing into another.For example, during crises, as it was in 1998 in Russia, many securities of the second echelon lost their liquidity. And then, stocky players will of the will or unillets turned into passive owners of portfolios, from traders - in strategic investors. Many of them occupied places in the board of directors.A reverse option is possible if the share of initial investors is significantly blurred by new issues. And this is not always bad.
Imagine that someone at one time has invested a thousand dollars in the shares of the new company, which later became the same Google. Maybe at the start, this money was almost half of the entire business. And of course, they gave certain rights to control and managing the firm.Gradually, companies attract new and new investors. But it is unlikely to do not like initial depositors, because in monetary terms, their share is also growing. You can imagine how much half or even a tenth, or a hundreds share of the authorized capital of the same Google today. Is it worth worrying about your share for such money?
Risk and profitability
Direct investment can bring much higher profits, but they are associated with high risks. Portfolio investment can be easily selling on the stock exchange, get out of position, minimizing damages if something went wrong. Otherwise, the situation is directly investment. Sell a share in the enterprise is not so simple. And if the business is unprofitable, it is often impossible at all.
On direct investments, people earn and 20, and 30, and 50 percent per annum, and even more, if, what is called, fall on the golden custody. But at the same time you can lose really everything that was invested. It is generally accepted to believe that almost nine of the ten new enterprises closes in the first year of its existence.Certain protection of professionals from such, directly, not impressive statistics - not only the assessment of projects, but also to diversify the portfolio. When not one, but ten enterprises are chosen for attachments, then the chance to lose everything and immediately below. And the fact that from this pool direct investment will work, should eventually cover the costs associated with misses and errors.
This type of business, that is, the involvement of funds and investment in young enterprises, investment specialists are engaged in the management of venture capital funds.
How to earn?
Formally, in order to engage in Russia to engage in large-scale direct investments, to invest in specialized funds - it is necessary to obtain the status of a qualified investor. Then the purchase of mutual funds of venture funds along with other securities will be available.
But you need to understand that these are not empty words. Status is required in order to make sure that the investor knows and understands what it does. Because venture capital investments are associated with high risks.On the other hand, under its own liability, every person can, as already mentioned, to prevent the money to a neighbor opening the car service in the garage on the contrary, and it will also be direct investments.
In order to engage in portfolio investments, you will need to open a brokerage account and gain access to trading on the stock exchange. But issued the necessary documents once, the investor receives indisputable advantages: to invest and output money is completely simple. It remains only as in any business, to make the right investment decisions.