Types of Investments

Among investors themselves, there is no clear understanding of what should be considered an investment and what should not. For example, some believe that buying and reselling assets is speculation, not investing. Some also believe that loans cannot be considered investments.

Personally, I disagree with these opinions.

Let me remind you that, in the classical sense, investment is any placement of capital with the goal of making a profit.

Therefore, whether you buy a company expecting explosive growth in its value or want to receive dividends from its activities for life, in both cases you are investing money in it with the goal of making a profit, so you are an investor.

Millions of Americans and Europeans buy and sell shares of various companies daily. It is difficult to understand and find out whether they intend to resell the shares at the first price increase or hold them for life and pass them on to their heirs. No one cares. All these people are considered investors in any case.

I also do not understand the negative attitude of some people towards loans. Yes, unlike equity participation, the lender does not bear the risks of entrepreneurial activity and receives interest in any case. But no one would think of considering buyers of bonds, notes, and debt securities on stock exchanges as usurers, interest-seekers, and parasites. They are as respected investors as stock buyers. Moreover, stocks and bonds are present in almost any portfolio investor’s portfolio. From the point of view of stock trading, there is no difference between these instruments.

In addition, in some cases, a loan is beneficial to the borrower themselves. Many entrepreneurs do not want to take an investor as a shareholder in their company. After all, in this case, they would have to disclose all the business details, report to them, and make joint decisions. This is a certain dependence. Many prefer to get a loan, make money with it, repay the loan, and pay the interest on it, and then part with the lender and move on independently.

There is also such a form of cooperation as an investor taking a share not in the company, but in one specific project or even one transaction of this company. This form of cooperation is convenient, for example, for investors strictly adhering to Islam. As is known, lending is unacceptable for them due to religious reasons. In this case, financing one specific deal or project allows them to invest money and make a profit without violating Sharia law. Unfortunately, this form of cooperation is also unacceptable for some entrepreneurs because, as in the case of an investor taking a share in the company, it involves disclosing the terms of the deal and financial details. It is more profitable and convenient for them to take a loan.

So, each form of investing has its advantages and disadvantages, therefore, each of them has the right to exist.