The most important investment
controls to get the best benefits Your comprehensive guide
Today's article is about one of the
most important influences on countries' economies, besides being the first and
primary source of wealth for individuals throughout history.
Economists agree that investment is
one of the most important factors of financial growth and prosperity, both at
the individual level and at the level of countries.
If you are a non-professional and
want to enter the world of investing or seek long-term financial wealth, today
we offer you a detailed guide that will help you understand what investing is,
its mechanisms of action, and the most important ones. And investment criteria
that you can use as a beginner before diving into them.
What
is the definition of investment
The concept of investing in general
is the process of investing money in something today with the aim of making a
financial profit in the long run.
In other words, investing: is an
action carried out by an investor, in which he uses a certain amount of money
to buy something in order to obtain material returns, or sell this thing in the
future with advantages.
We can also define investment in two
different aspects:
Economic
aspect
Economically investment is defined
as the process of buying products or goods of relatively low value at the
moment, but economic indicators show the market need them in the future, and
therefore they are sold after a while and financial wealth comes from them.
Financial
aspect
As for the financial aspect,
investment is the process of buying cash assets that can increase in value
after a period to sell them, profit from the price difference between the sale
and purchase, or their profits while maintaining their original value, such as
investing in stocks and bonds.
The
difference between investing and saving
Saving and investing is an important
aspects of individuals' financial life.
Saving means that you deduct part of
your income and keep it in a fixed form until you need it.
As for investing, as mentioned, it's
all about directing some or all of your money to a particular industry to make
a financial profit.
As a result, we find that investing
and saving complement each other and must be balanced to achieve material
wealth.
Investment is the most important
aspect on the road to material wealth if your investments are properly
oriented, and yet it is wrong to direct all your money towards investing,
because markets are characterized by volatility and instability, so they should
be. Sufficient savings to cover the value of your expenses or financial
obligations during an economic depression.
On the other hand, there is no way
you can keep all your assets in savings at all, this reason is because
inflation rates double the physical value of fixed assets, resulting in a
decrease in the purchasing power of money due to higher prices.
So as we mentioned you must balance
between saving and investing in your material life so that you can achieve
material wealth, and at the same time, you can take the necessary precautions
regarding market changes, to avoid going through financial crises at the time
of the market. Collapse.
The
importance of investment
Investment is the engine of economic
life for communities, governments, and individuals.
The importance of investment at the
national level
Pumping investment into the
construction of factories, facilities, and investment projects in various
fields effectively contributes to diversifying the economic structure of
countries and enhancing the strength of their economies.
Investments help governments create
new jobs for young people, improve people's lives, and ensure their financial
prosperity.
Investment helps to increase
production, thereby increasing the volume of exports and reducing the volume of
imports, which means an increase in the recovery of the national economy.
Investment helps strengthen the
country's local currency and helps it cope with global inflation rates, helping
to create a balance between foreign and local currencies.
The
importance of investing at the individual level
1-
Evolution and growth of your capital.
Long-term investments are the only
guaranteed way to achieve enormous financial wealth, as they allow you to reap
huge additional profits while maintaining the financial value of the assets you
have invested.
2-
Ensuring a decent financial life when you decide to retire from work.
Work is an aspect of life, not life
as a whole. Some work hard all their lives because there is no other way to
earn enough income for life's basic needs. Others work during certain periods
in which they take part of their income for investment purposes, plan to retire
at a certain age, and enjoy the wealth that will result from their investments.
If today you are thinking about
investing and making financial profits, then in another aspect of your life,
you should think about when you want to retire from work and enjoy life without
bearing the burdens and risks of work, so the early investment is your best
option. It provides you and your family with a decent and luxurious life when
you decide to retire.
3-
Make additional profits with less effort.
Many types of investments do not
require much effort, such as requiring you to have management experience, or
being at the headquarters of the project and supervising it to ensure that you
reap large profits. One of the most important areas of investment that does not
require effort is investing in stocks, which allows you to acquire ownership in
a company only for the money in which you participate, without interfering with
its management.
4-
Achieve your financial goals.
Each of us has many financial goals
and big dreams related to the availability of money, so you want to buy a
luxury car or a big house, or you want to travel and see sightseeing around the
world, and other goals and dreams. Constructive investing will provide you with
greater opportunities to achieve these goals than your investment returns
without compromising fixed assets.
5-
Expand your business circle.
Starting an investment in a
particular area will help you expand your business network and establish more
effective relationships with investors in other areas, which will open up new
opportunities for you to expand your business circle in various fields.
6-
Contribute to community service and development.
Life is full of goals, and one of
the most important of these goals that each of us must work for is to
contribute effectively to the service and development of the society in which
he lives, according to his scientific and practical abilities and capabilities.
Materials.
The investment provides you with
better opportunities to contribute to the development of society, through the
implementation of targeted projects such as support projects to educate
children from classes that are unable to afford the costs of study, or
accompanying the development of the skills of young graduates and their
qualifications. For the labor market, or projects aimed at providing shelter
and basic needs of poor families, and other similar projects. Projects that aim
to serve and improve the community through personal efforts are as important as
your financial goals and personal life as an investor.
7-
Supporting entrepreneurs.
Investors today may have been yesterday's
entrepreneurs and do not have the money to create their projects, but they have
the idea on their own, and they are looking for investors who finance their
ideas and create a new market that allows them to progress from the world of
dreams to actual implementation, but they lack the capital to start their
implementation.
A smart investor is someone who is
looking for new ideas to be implemented in the markets in which he invests,
thus securing new sources of financial wealth, while helping to support
entrepreneurs.
Investment
controls and standards (for maximum benefits)
Economic markets are characterized
by extreme changes and are influenced by political events inside and outside
the country, economists explain that 60% of financial and economic decisions
are made by specialists, believing that the time is right to make them, but
later turn out to be bad decisions. So what about non-specialists?
Investing money is a very complex
process, and at the same time it is an adventure and risk that must be carried
out with extreme caution in accordance with study, experience, knowledge,
economic standards, and controls, the main of which are:
Refer to the opinions of specialists
and experts in the field in which you intend to specialize before making the actual
investment, because the opinions of experts will save you a lot of time and
effort, and will also save a lot of resources that are likely to be lost due to
the loss of both experience and elements of the specialization.
If you intend to invest in a partnership
with another person or group of people, it is very important that these people
are qualified to enter the business and investment field, have real experience
in the industry they want to invest, and must also have good manners, honesty
and good reputation.
The ethical dimension of people is
an important aspect of the rules of work and partnership. Before deciding to
participate, financial transactions must be processed for a sufficient period,
as well as clearly define the tasks of the partners under legal guardianship,
in order to reduce fraud, fraud, or loss of invested funds.
Diversify investments between more
than one region or industry as they say (don't put all your eggs in one basket
because all are likely to break, but if you distribute eggs in more than one
basket that's the limit of the chances of breaking them all).
Thus, the probability of losing
money if we invest in a single investment will be great, but if we distribute
it to more than one industry or region, it guarantees more conservation and
reduces the likelihood of losing everything.
Enthusiasm and desire to invest in a
new business, and if done right, will likely take you to a financial level you
did not expect before. Keeping money from loss is extremely important, no less
important than investing it.
One of the most important investment
controls that give the investment process real financial value is to make your
investment long-term and not short-term.
Long-term investments are a real
investment that allows you to make huge wealth, while short-term investments
will not bring you huge profits, and in the following article, we will discuss
the most important types of long-term investments and ways to invest in them.
The general vision of the markets,
because the smart investor who is interested in his money and investments must
be characterized by a strong awareness and knowledge of the markets in general,
and of the markets that affect his investment field in particular, and not
only. The markets in which you invest.
If your investment is in moving
furniture, for example, you may need to ask yourself these questions:
For example: What is the impact of
higher oil prices on your investments?
Equity
investment
Equity
investment refers to the process of buying shares in a company, becoming a
part-owner of that company and participating in its potential growth and
success. The value of equity investments can increase or decrease over time
depending on the performance of the company and the overall stock market
conditions.
One of the key
benefits of equity investment is the potential for significant returns on
investment. By buying shares in a company that performs well, an investor can
see a significant increase in the value of their shares. This can lead to
substantial financial gains, which can be used to further diversify an
investment portfolio, fund retirement, or achieve other financial goals.
However,
equity investment also comes with a degree of risk. The value of shares can
decrease if the company performs poorly, or if overall market conditions
deteriorate. This can result in significant financial losses. To mitigate this
risk, it's important to diversify your investments and not to invest more than
you can afford to lose.
Another
important aspect of equity investment is research. Before investing in a
company, it's crucial to research the company's management, financials,
industry, and competition. This will help you to make informed decisions about
which companies to invest in, and how much to invest. Some investors also
prefer to focus on companies with certain characteristics, such as companies
that pay dividends, or companies with a sustainable focus.
Additionally,
it's important to monitor your equity investments over time, and to make
adjustments to your portfolio as needed. This may involve selling shares in
underperforming companies, or buying shares in companies that show promise.
In
conclusion, equity investment can be a great way to build wealth over time, but
it requires careful research, monitoring and management. It is important to
remember to diversify your investments, not to invest more than you can afford
to lose, and to always be mindful of risk and returns. With the right approach,
equity investment can be an effective way to achieve your financial goals.
Investment
Risk
Instability and volatility of
financial markets as mentioned earlier.
Inflation and high prices are among
the most important risks facing any investor.
The risks of credit limitation, due
to which many problems can occur.
Strong injection of foreign
investment, which affects the opportunities of small local investors.
The political situation of the
country and its relations with other countries politically and economically.
Competitors and large investors who
monopolize the market in which you invest and their ability to control prices.
The investor's lack of experience
and knowledge and his inability to respond flexibly to economic changes.
All these things and more are part
of the risks that put new investors at risk of losing their money or not being
able to continue with the investment process.
Advantages and Disadvantages of
Venture Capital
Venture capital funds new
enterprises that do not have access to stock exchanges and do not have adequate
cash flow to incur debt. This agreement has the potential to be mutually
beneficial:
Businesses obtain the financing they
need to get started, while investors acquire stock in potential enterprises.
A VC investment has additional
advantages. VCs frequently give mentorship services to assist young firms
establish themselves, as well as networking services to help them acquire
talent and advisers. A significant VC support might be used to fund additional
investments.
On the other side, a company that
takes VC funding may lose creative control over its future course. VC investors
are likely to seek a big portion of the company's stock, and they may also
start placing demands on the company's management. Many VCs are just interested
in making a short, high-return payback and may put pressure on the firm to quit
quickly.
The
best features and benefits of investing
The advantages of investing are
numerous, both at the individual and collective level, and the following have
been identified: Overcoming the problem of inflation Inflation is considered as
a rise in the general level of prices, and therefore a continuous rise in cost.
of living over time, as this affects financial well-being, so investing is one
way to overcome inflation, since it generates real long-term financial returns through
assets such as real estate, as well as the possibility of capital growth.
The possibility of obtaining
long-term return liquidity is safer than securities (stocks and bonds), and
therefore cash is unlikely to grow significantly unlike securities, especially
in the long run, and volatility in the financial market is not necessarily a
bad thing in reality.
These fluctuations can sometimes
allow investment owners to buy stocks at a lower price, resulting in better
returns in the long run.
Capital growth is the primary goal
of investment, as investors invest their money, so that capital grows
significantly over time, especially since its growth and the expectation of
financial returns from this leads to better future plans.
Reducing the tax burden Many investors
have hidden goals, regardless of their goals in investing their money, such as
preserving it and achieving capital growth, which is to reduce the tax burden,
especially if the state offers additional facilities and benefits to the tax
rate in the country. Investment status, in order to encourage investment.
Earning additional income Investing
leads to earning additional income, especially if the investment is in
high-quality transactions, and also leads to improving living standards and
increasing the social and financial well-being of individuals, because
additional income is obtained from the total income of the individual. Other
individuals multiply their money and wealth.
Achieving financial goals helps to
invest achieve financial goals, whether those are short-term or long-term
goals, as there are many different investment tools that individuals can invest
their money in depending on the type of goals.
For example, if individuals want to
get returns in a short time for urgent business or to cover urgent expenses,
there are short-term investments and vice versa in long-term investments,
except that investing in long-term instruments generates higher returns than
investing in short-term instruments.
How to Invest in a Startup
It might be difficult to provide a
specific description of a startup: it can be a firm developing a new product or
service under significant uncertainty, or a corporation attempting to tackle an
issue when the solution is not evident and success is not assured.
Investing in startups, whichever you
define them, used to need both wealth and solid relationships. This is no
longer the case, and ordinary investors may easily get a piece of an intriguing
business potential by using crowdfunding portals.
Startup investing may be rewarding,
but it's crucial to recognise that it comes with significant dangers. The great
majority of companies fail—even if you do your homework, you might wind up with
nothing in your pocket. Here's what you need to know before you start investing
in startups.
Ways
to reduce investment risk
Get enough savings to cover personal
expenses and pay off any outstanding debts for several months until you start
making a profit.
Have realistic and clear financial
goals after a good study of the market in which you intend to invest.
Conducting insurance, which ensures
that you protect your investment in case of negative market developments, such
as obtaining insurance on fixed assets you own, such as real estate.
Life insurance business.
Health insurance company.
Good knowledge and study of the tax
laws of the industry in which you will invest, which vary from country to
country, as well as from industry to industry.
Closely monitor the financial
markets for a long time to understand the mechanisms of the industry in which
you intend to invest, and continuously monitor government decisions, because
they are a strong and influential factor in the movement of markets of all
kinds, as well as newspapers to know the economic developments that occur in
the world.
Through this article, I wanted to
expand the circle of thinking of those wishing to invest, and new investors, by
introducing them to the investment process and the many aspects that surround
it.
In the following article, we will
discuss the most important investment opportunities that you can take advantage
of and areas in which you can diversify your investments.
Constructive posts that allow us to
develop the proposed content are always welcome, so feel free to tell us what
you think of the article, in order to improve the quality of the content. Any
new ideas you'd like to see covered are also welcome in the Business section of
our website.
As a management consulting company,
Farouk Group provides you with the opportunity to develop business and enter
new markets through strategies from the best experts in the field of
development and entrepreneurship.
Farouk Group helps you raise your
performance indicators to reach the level of global indicators and the best
conditions and services necessary for that.
Consult business development experts
now and start a new experience with Farouk Group.
Equity investment
Startup investment
Venture capital
Private equity
Business angel
Initial public offering (IPO)
Stock options
Corporate bonds
Crowdfunding
Seed funding
Angel investment
Mezzanine financing
Leveraged buyout
Due diligence
Shareholder activism
Corporate governance
ROI (return on investment)
Earnings per share (EPS)
Market capitalization
Liquidity
Growth potential
Share buyback
Mergers and acquisitions
ESG investing
Impact investing
Company valuation
