Types of portfolio investment. Portfolio investments - what is it? Advantages and nuances of portfolio investing

It is carried out by compiling and investing in a portfolio of securities.

It is the securities portfolio that allows the investor to plan, evaluate and control the results of his investment.

A securities portfolio is a collection of various types of financial instruments owned by an individual or legal entity, possessing a certain risk-return ratio and capable of solving specific investment problems.

Portfolio investing is investments in stocks, bonds, securities with a fixed guaranteed income, as well as in securities with a potentially high level of income with possible high risks.

Each one makes up its own unique document, which consists of different kinds of papers. Some people prefer to make a quick profit, and their portfolio primarily includes stocks. Some, on the contrary, rely on reliability, and the basis of such a portfolio is government securities and bonds of large companies.

Features of portfolio investment

The main goal and task of the portfolio is the constant improvement of such a qualitative indicator of the investment portfolio as the risk-to-return ratio of all securities that are included in it.

Also, a very important feature of an investment portfolio is that it provides it with the investment quality that an investor needs. This is explained by the fact that not all goals and objectives can be achieved by investing in one security; this is why portfolio investing exists. By combining objects, and specifically securities, the investor achieves his goals.

Income from portfolio investment equal to the total profit on all securities included in the investment portfolio, taking into account possible risks. Therefore, every investor is obliged to constantly analyze the composition of his investment portfolio and adjust and regulate the risk-return ratio.

Often income from portfolio investment called speculative. After all, the income received by an investor consists of an increase in the value of the security in which he invested, as well as from dividends on it.

The main rule portfolio investment It sounds like this, under no circumstances should you invest all your available funds in one investment object, in one security. It is always necessary to have a reserve fund to deal with unforeseen problems.

Main difference portfolio investment from other types, this means that the investor is a passive holder of the security and does not participate in the management and other affairs of the company that owns his security.

We often hear the word “investment” in the news, read in newspapers and magazines. But for an ordinary person who does not understand the topic of finance, it is not clear what this concept means, especially since it is difficult for him to guess about the classifications of the investment process. In this article we will define in detail what investments are, what types there are, and also dwell on the concept of “portfolio investments”.

Investments - definition of the concept

As we know, nothing happens for nothing, especially investing money. Any investor expects such an action to exaggerate his income. With the help of investments, you can make a profit by increasing the value of your own securities, as well as when dividends are received. Thus, investments are correct and calculated investments of certain capital with the aim of making a profit.

Types of investments

There are two types of investments.

Real - investments in material and intangible resources. These specialized concepts include material assets, intellectual property, inventions, scientific and technical elements and other capital.
Financial - investments in securities, various assets, bank deposits and others.

There are differences in such investments based on purpose.

Direct - along with financial investments, a person receives the right to manage the business in which he made an investment. As you know, each enterprise has its own authorized capital, with this type of investment the investor receives at least 10% of this capital. At the same time, a person who has invested in any enterprise gets the opportunity to manage a controlling stake.
Portfolio investment represent the indirect participation of the investor in the process of earning money.

What is portfolio investment?

Portfolio investments are investments that are designed to provide financial benefit through the payment of dividends and interest. But the investor does not manage the enterprise or organization in which the funds were invested.

The difference between direct investment and portfolio investment

Direct and portfolio investments investments differ in volume. At any moment, portfolio investments can switch to a different type; this happens if there is a drop in market liquidity. And if liquidity is at a good level, then, despite the negative trend, the investor can sell his investments at a favorable price.

What types of portfolio investments are there?

Direct and portfolio investments have their own varieties. The latter can be classified according to different criteria of their formation and demand in the securities market. It all depends on the criteria by which investments are distributed.
Types of portfolio investments are distributed according to the degree of profitability and risk as follows:

Investments that have the highest return, but at the same time there is a very high risk in the efficiency of using funds.
Investments that generate ongoing, stable, small returns. They mainly consist of shares of reliable companies and have a low probability of risk.
Investments that consist of shares of varying returns and degrees of risk.

Portfolio investments can be classified depending on the timing:

Short-term - can last from several hours to six months.
Medium-term - their investment period is from 6 months to one year.
Long-term - from 1 year or more.

Making such investments within the country

There is deep control over various investments within the country. Current legislation applies to both direct and portfolio investments. Especially such increased attention from the state is observed during a crisis, which, in turn, negatively affects profit generation.
Impact on the investment process government agencies includes the following items:

Regulation of all conditions that are directly related to investment activities. The documents reflect all income and expenses, in most cases additional taxes are included. But there are also opportunities to protect investors at the legislative level, which stimulate and create favorable conditions for economic development.
Direct participation of the state in investment activities, that is, the state continuously participates in the formation of the capital of the enterprise.

Foreign investments of this type of investment

Portfolio investments made by foreign citizens or enterprises are investments of a certain capital of investors in more profitable companies and holdings. The foreign investor himself does not take part in the life of the project, but only observes it with the intention of receiving high profits and reducing risk indicators.

Foreign portfolio investments include: bonds, transferable bank receipts, shares, certificates of deposit, promissory notes, bonds.
Portfolio foreign investments, in turn, are divided into the following types:

Debt securities that have value - they are given to investors by the managers and directors of the project, in which the latter undertake to pay dividends and interest upon completion certain work and receiving profit from the implementation of the project;
Securities with value are documents that provide a guarantee that the investor has contributed capital and the funds will be paid upon maturity.

How are they carried out?

Portfolio investments are made to a greater extent with foreign countries, whose development is at a fairly high level. Behind last years There is a net outflow of investment from developing countries. This indicator does not reflect very well on the domestic economy of a country. Despite such problems, international organizations continue to buy securities of other countries.

Foreign portfolio investment is an investment in securities produced outside a specific country. In this case, the investor cannot control the investment object.

Portfolio investments are carried out in the form of circulation with securities, which should bring sufficient profit to its investor, as well as success to the developing project.

What nuances hinder the implementation of portfolio investments?

Like any business, a business cannot exist without the support of partners and investors. To carry out portfolio investments, investments of funds are required, and quite a lot. And attracting oligarchs who could become investors is not very easy. It takes a lot of time to find these very people who will agree to invest their capital in the development of the project.

The next difficulty in making portfolio investments is retaining existing investors, as well as attracting new ones. This requires proving that your project will bring good profits in any case, and also minimizes the risk of losing funds. A company that has been on the market for at least five years is considered ideal for an investor.

To interest an investor, you need to do titanic work - learn the psychology of investors, analyze your weaknesses and find an explanation for them with motivation to improve the situation, and also adhere to the following points in negotiations:

It is necessary to talk about investors who have already invested their capital and continue to participate in the life cycle of the project. This must be done based on specific positive facts of cooperation. If there are few of them, you need to clearly formulate the prospect of working together.
Show that the company's shares are not subject to the risks that may arise in the event of a crisis. To do this, it is necessary to work on several areas of doing business, ranging from currency exchange rate fluctuations to market relations.
Convince the investor of the advisability of investing capital in the project. Here it is important to draw up in advance the positive points that will arise when working with your company. Based on the psychological characteristics of the participants in the negotiations, you need to present these points in such a way that future partners have no doubts about concluding financial agreements with you.

Portfolio investors - who are they?

These are people who donate their capital to the development of the project. They are interested in maximizing profits from securities, and not in the control of the company itself, as previously stated.
Portfolio investors include pension funds, insurance companies, investment funds and, in some cases, individuals. But not all individuals use this type of investment. After all, every owner does not want to give away some capital to other people without their own control over the process of project implementation. Therefore, portfolio investors in most cases are organizations.

The positive aspects of such investments

Portfolio investment is an investment of capital in a specific project that expects to make a profit in the future. In turn, investors should focus not only on profit, since a lot of work needs to be done before making a profit. And the positive aspects for investments should be:

Small risks for investing, which are directly ensured by diversification of assets. Assets must be at a sufficient level and meet the design conditions.
Fund management on top level. If the workers are sufficiently qualified, the project will definitely be successful, since they can initially analyze and see the outcome of the results obtained in any situation. Therefore, it is important to involve highly qualified specialists in a specific field of knowledge in the implementation of conceived ideas.
There are no tax costs, since the profit received can be left in the accounts of the investment fund, as well as poured into subsequent projects or other profitable organizations.

The concept of portfolio investment is widely used in modern world. The essence of this concept is investing money in a profitable business, as a result of which the investor makes a profit. Portfolio investments have a number of positive aspects that directly affect the attraction of new investors. Recently, we have seen a trend towards direct investment, since the person who invests money wants to personally control the process of implementing a specific project. At the same time, he selects personnel, trains them (if necessary), and manages the financial remuneration of employees.

They represent a source of long-term financing for enterprises. Organizations such as, for example, or a certain focus, may be portfolio investors. Represented by these organizations, they act as buyers of company shares. The fundamental difference between their strategic investors is reflected in their interest in greater profit, but without direct participation and control of the operational aspects associated with such investments. It goes without saying that when purchasing shares, the interest of a portfolio investor is determined by rising prices for these securities in order to receive good dividends.

The goal of such investors becomes realized when profitability is achieved and possible risks regarding loss of funds are reduced.

Priorities of portfolio investors

Taking into account such nuances, portfolio investors are not in a hurry to take possession of any one controlling stake, but have experience in purchasing securities of several enterprises and at the same time receive voting rights according to the number of securities purchased.

Types of securities

Companies are divided into several types:

securities that provide a specified fixed income. These include both deposits and shares;
securities classified as derivatives. This is the presence of options and futures;

Investment attractiveness of various securities

Securities may differ in investment attractiveness. For example, the main criterion for the value of a stock in the eyes of a portfolio investor is the future growth of its value and the stability of dividend payments. On the same side, the value and attractiveness of bonds is expressed in the reliability of this type of security. Although they are inferior to stocks in terms of income generation, they provide greater certainty of income and consistency in the possibility of receiving it. As for options, as well as futures, which have a very high investment attractiveness in terms of generating large profits, they include a certain amount of risk.

The rules for compiling an investment portfolio for each investor should be based, roughly speaking, on two main assumed criteria, these are:

profitability forecast;
and possible risks.

All. Now you need to decide on the choice of issuers and diversify your investments.

Risk level of a portfolio investor

By and large, any investment is subject to risks that are influenced by factors such as economic and legislative changes, as well as a reckless choice of securities of a particular enterprise and erroneous forecasts regarding the expected profit. It is in order to make the right decision on the formation of an investment portfolio that the need arises to obtain competent advisory services in the field of strategic financial management.

Investments are an integral component of entrepreneurship. This phenomenon is significant both for an individual company and for entire industries, and even for the entire state. Investments are classified according to a variety of criteria.

There are direct investments, and there are so-called “portfolio” ones. How are they different? What are the main features and types of portfolio investments? What is the role of foreign organizations and entrepreneurs in national economies? How significant is international portfolio investment? We will try to answer these questions, as well as reveal a number of other nuances characteristic of the processes accompanying financial investments in business.

What it is?

Portfolio investments, according to the definition widespread among Russian economists, are investments whose purpose is to generate income by increasing the value of the financed asset. In practice, this most often means receiving some kind of dividend payments or interest on the growth of shares. Portfolio investments, as a rule, involve investing financial resources within a certain share in the project. This is their difference from direct ones, when all assets or a controlling part of them are purchased in order to obtain the status of the sole owner of the company by the investor.

Portfolio investments usually include transactions related to the investor’s entry into authorized capital firms, as well as those associated with the purchase of shares and other securities. Who is most likely to make this type of investment? The range of entities engaged in portfolio investment is quite wide: these can be banks, funds, individuals, and government organizations. Foreign organizations and entrepreneurs can also be active investors.

Investments and stock market

There is a widespread version among economists that portfolio investments are investments made by individuals and organizations in stocks that rotate on stock exchanges. Can this point of view be considered legitimate?

To answer this question, let’s define what the stock market is. First of all, this is a mechanism for attracting additional liquidity. If enterprises want to increase their capital intensity, then they issue shares and put them into circulation on a special kind of exchanges. As investments received from domestic and foreign players increase, the value of securities increases. Behind it is the capitalization of the company and, accordingly, the scale of the business. If the demand for shares falls, then the value of assets also decreases.

Thus, it is quite possible to agree with the thesis that monetary investments in stock trading are portfolio investments. In addition, attracting financial flows within the framework of exchange trading, it is very significant from the point of view of the development of specific corporations, industries and even national budgets. That is, obviously, subjects of economic processes at all levels are interested in having an investor come to them through stock trading.

Investment risks

Investing in any business almost always involves some risk. An investor, when investing in a company, realizes that his capital may well lose value over time. The firm's assets may become worthless. What are the most common risks of portfolio investments? Experts divide them into a fairly large number of subspecies. Let's look at the main ones.

Country-specific risks

First of all, an investor, having invested in a business operating in the market of a certain country, may encounter manifestations of local, characteristic of a particular state, crisis trends of an economic or political type. In addition, even if there are no negative factors of one nature or another, the government of the country can, without advance notice to market participants, make some legislative adjustments to a particular industry. The new legal regime may well negate the advisability of financial investments in a particular company or even industry.

Corporate risks

Portfolio investments in a business can be a bad move if the entrepreneur directing them does not assess the development prospects of a particular company well enough. It may well turn out that, given a favorable economic situation and stable demand for products or services, the company’s management will not be competent enough to conduct business.

"Diversification" of investments

Above we talked about the risks inherent in investment activities. What are the most effective mechanisms to prevent them? How to make portfolio financial investments wisely? Experts recommend sticking to the following basic tactics:

use, where possible, long-term and cheap loans (so as not to block current cash capital);
the investor must use exclusively his own funds as fixed capital;
repay loans taken for business investments using dividends (and other profits) rather than current capital;
Having invested in a business, try to minimize the expenditure of resources on managing a specific investment portfolio;
reinvest profits primarily in repaying loans.

Of course, this applies to those types of activities that do not involve conducting exchange trading. The policy of trading in the stock market is a completely different “discipline” from classical financial risk management.

Legislative regulation of portfolio investments in the Russian Federation

A feature of the Russian financial system is, according to many experts, the state’s involvement in investment processes is quite high. There are laws at the federal level (such as, for example, “On Joint-Stock Companies”, “On the Securities Market”, “On the Protection of Investor Rights”, etc.). According to Russian laws, portfolio investments are carried out within the following types of activities.

Brokerage services

This type of activity involves the preparation of civil agreements related to the circulation of securities. A broker works by proxy or on behalf.

Dealer services

This type of activity is quite similar to the previous one. However, a dealer, unlike a broker, makes transactions on his own behalf, without using a power of attorney or instruction.

Trust financial management

This type of activity is quite close to the previous one, however, the right to transactions with securities arises with the entity that has received capital in trust for a certain period. Also, agreements between the investor and the manager, as a rule, stipulate mechanisms of responsibility for the results of transactions with funds.

Depository services

This type of financial services involves storing share certificates and other securities. Their owner (depositor), who transfers documents to the subject of such services (depository), does not transfer any rights to capital management.

Activities of stock exchanges

Actually, this type of activity involves organizing work on the correct and legal circulation of securities according to trading principles.

There are also additional activities with which the portfolio investment market intersects. Among the most significant for businesses is maintaining a register of owners of shares and other securities, clearing (accounting for financial obligations).

How does the state manage investment flows?

What are the practical mechanisms for the participation of Russian authorities in regulating relations between investors and entrepreneurs? Experts identify the following channels:

implementation of registration procedures in relation to the issue of shares and other securities;
legislative regulation of processes related to the operation of stock instruments;
issuing licenses to operate to institutions involved in the field of investment (funds, enterprises, banks, etc.);
carrying out certification activities related to confirming the qualifications of financial specialists who work with securities.

The noted channels of work of government agencies regulate the activities not only Russian organizations and entrepreneurs, but also the area where direct and portfolio foreign investments are made.

Regulatory Policy Principles

Relations between Russian entrepreneurs and those who invest in their business must be built in accordance with a number of principles laid down in the laws of the Russian Federation. Namely:

transactions related to the purchase and sale of shares and other securities are recognized as legally valid and valid if the certificates and other documentary components of the agreement fully comply with the law;
entrepreneurs and organizations are obliged to provide investors with reliable information regarding securities (prospects and current profitability figures, subtleties of taxation, etc.);
employees of government agencies and private financial organizations do not have the right to disclose information available to them regarding certain investment transactions and other procedures related to the circulation of securities.

Who regulates the circulation of securities in Russia?

The relationship between organizations and investors in Russia is regulated by several government departments. These include:

Ministry of Finance of the Russian Federation;
Federal Antimonopoly Service;
Central Bank (including its subordinate Financial Market Service);
The Federal Tax Service.

Many experts call the Financial Market Service of the Central Bank (formerly the Federal Securities Commission) the key agency regulating the investment sector.

Investments and international market

As we said above, investors can be not only entities that have citizenship or registration in the country where the investee does business. In many cases, these are also people and companies from other countries. Regarding the Russian market, foreign players make direct and portfolio foreign investments. In this sense, the Russian economy can be considered sufficiently open.

Direct foreign investment

Direct investments of foreign entrepreneurs and organizations consist, as a rule, in obtaining a controlling stake in companies that are strategically significant for the country’s economy, or, as an option, opening branches in the largest industries (in order to take leading positions in certain segments).

Portfolio foreign investments

There are also portfolio foreign investments made by business players from other countries. What does this type of activity represent? Investments of this type are, as a rule, investments in the securities of those companies that, according to foreigners, have the highest probability of growth (both due to natural scaling and due to raising capital on stock exchanges).

Some experts express an interesting point of view on this matter. They believe that portfolio foreign investments become significant for foreign entrepreneurs only if they have failed to make direct ones. That is, gain strategic control over the company's assets in a specific country. One way or another, this type of activity is actively practiced in the world.

Just as in the case of the activities of Russian financial residents, international portfolio investments are carried out in strict accordance with the legislation of the Russian Federation. The work of foreign financiers in Russia is also quite strictly regulated by the state within the framework of the mechanisms that we discussed above.

Who is a foreign investor?

What is the legal definition of a foreign entity investing in companies registered in the Russian Federation? According to Russian laws, the following wording is acceptable:

a legal entity of foreign origin, whose legal capacity arises by virtue of the laws of its state, which has the right to conduct activities on the territory of the Russian Federation;
organizations that do not have the status of legal entities, but have the right to invest in Russian businesses (also due to the legal norms of their country);
foreigners with the status of individuals who have the legal capacity to work in Russia by virtue of the laws of their country;
persons who do not have a passport of any of the existing sovereign states, but have the right to invest in enterprises on the territory of the Russian Federation by virtue of the laws of the country that is their permanent place of residence.

Foreign organizations can also conduct activities related to financial investments in Russian businesses in accordance with international treaties of the Russian Federation, as well as foreign states (in accordance with the standards set out in federal laws).

Investment in the statutory capital of companies is conventionally divided into two types - direct and portfolio. Portfolio investment involves dividing the entire amount of capital for further investments.

The concept of “portfolio investing”

There is no clear line between portfolio and direct investments. Many private equity investors, which provide the right to manage a business, may not even get involved in the companies' operations.

Portfolio investments are capital investments, the main purpose of which is to generate profit through the payment of interest or dividends on shares, while the investor does not take part in the management of the enterprise where he invests his money.

Portfolio investments (compared to direct deposits) may be of insignificant volumes.

Portfolio instruments are debt-type securities (bills, bonds) or equity securities (for example, shares).

Portfolio investing is aimed at making a profit in the short term. The portfolio has high liquidity (reacts very strongly to the slightest changes in interest rates in world economies). In the event of an unfavorable situation, the investor can quickly leave the portfolio investment market by selling his assets without any problems.

The investment portfolio generates little income, however, the risks of capital loss are much lower than with direct investing.

The main portfolio investors are individuals, banks, special funds, as well as other financial organizations. A significant share of the portfolio investment market is occupied by foreign investors.

Main types and types

There are two main types of investment portfolios, which differ in how they generate income:

Growth portfolio. Investor dividends are formed and paid due to the growth of prices of securities in which funds are invested. Depending on the growth rate of asset values, aggressive, medium and conservative portfolios are distinguished. If the investor’s portfolio includes predominantly aggressive instruments (shares of “young” companies), then the level of risk should be taken into account. A conservative portfolio contains shares of stable and reliable companies. However, dividend payments in this case are much lower than when working with aggressive instruments. A portfolio with an average growth rate is characterized by assets of both aggressive and conservative types. The most common mixed type of portfolio with average growth rates in the market value of assets;
Income portfolio. The income of an investor who invests in an income portfolio depends on the amount of dividends. This perfect option for conservative investors who are aimed at receiving a minimum but stable income.

Very often there is a mixed type of portfolio, which provides the investor with profit both in the event of an increase in the market value of assets and in the payment of dividends.

Portfolio investments are carried out in the following forms:

conservative;
aggressive;
moderate-aggressive;
national investment.

A conservative investor creates a portfolio based on stable and proven assets. This protects capital from inflationary processes, however, income from this activity is minimal.

Moderate-aggressive investing involves owning securities that offer small returns with moderate risk.

An aggressive investor works only with risky, but highly profitable assets.

The national investor does not resort to the above types of portfolios and forms his working tool by selecting random assets that he likes.

Advantages

The main advantage of an investment portfolio is the ability independent choice assets included in it.

Thus, the investor can choose an acceptable level of risk with a certain percentage of profit from the deposit.

In order to diversify (distribute) risks, the investor invests in the statutory capital of several companies at once.

A collapse in one firm's shares will be offset by gains from another's shares.

In addition to the main advantage of the portfolio, there is also an additional advantage - this is the absence of the need to manage a business.

In essence, portfolio investing is passive income that does not involve any interference in the company’s activities, which is why it is often called “earnings for the lazy.”

Strategies

Strategies for working with portfolio investments (based on the method of managing funds) are divided into active and passive. Passive strategies are based on the principle of “market following”. In simple words

, an investor must simply follow market trends to make a profit. Even a person who does not have basic knowledge in the field of finance or investing can work using such a strategy.

Most often, passive strategies are used by conservative investors who do not “chase” excess profits. The main goal of a passive strategy is to protect funds from inflation and other negative financial processes. At the same time, the investor also receives additional income with minimal risks.

The composition of the portfolio when working with a passive strategy remains unchanged throughout the entire activity. Typically, the investment period ranges from six to twelve months. A passive strategy helps create a highly diversified portfolio and allows you to very accurately determine returns and risks.

The difference between a passive strategy and an active one is the minimum amount that is allocated to transaction costs (costs of conducting operations).

Active portfolio investment strategies imply the following working methods:

Conducting regular market reviews with a view to immediate purchase of assets.
Rapid change in the volume and type of assets included in the investment portfolio.
The main work is aimed at achieving an income level that exceeds the market average.
High financial costs.
Active portfolio management strategies are used by investors who have certain financial knowledge.

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Planning and calculation of profitability

One of the most popular methods for planning portfolio investments is the “three basket method”.

Based on the goal pursued by the investor, the “three basket method” allows you to select the optimal assets.

The overall level of income will be determined by the sum of all income minus expenses for individual asset groups.

First the basket is called “Fixed income”. It includes assets with minimal risk and low income, for example, bank deposits, bonds, real estate, bills.

Second the basket consists of regular investments (long-term programs - pension capital, savings for education, etc.).

Third basket includes active and risky investments that bring good income, for example, shares of young companies, currency pairs, options and others. This part of the portfolio requires constant monitoring and active action from the investor. Typically, this basket is used in the short term. As an investor approaches old age, it is recommended to reduce the volume of risky investments.

To understand the essence of portfolio investments, we will give a brief example of calculating profit on a portfolio. Let’s build our portfolio using the “three baskets” method.

Let’s say the portfolio will include three instruments: a bank deposit with a rate of 5% of the amount in rubles (simple interest), a pension subsidy at the level of 6% of the amount of the annual mandatory deposit, which is 25,000 rubles, and shares of the young company “Regina”, which engaged in the production of summer shoes.

The investor's annual dividends are 1.2% of the deposit. The investor has 2,000,000 rubles. Let's divide the amount into parts for each basket: for the first - 987,500 rubles, for the second - 25,000 rubles. and the third – 987,500 rubles. What profit will the investor receive in the short term (in a year)?

In the short term, income will be: (987,500*0.05)–25,000+(987,500*1.2)= 49,375–25,000+1,174,200=1,198,575 rubles. In addition, the investor will receive another 6% of the total amount of all pension payments, but only after retirement (ie in the long term).

Portfolio investing is a popular type of passive income. Proper portfolio formation will help you achieve your financial results.

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