One of the most important things in managing finance is to make investments. However, what is investment? 

Before making an investment, it will be nice if we learn more about the investment, starting from the types, examples, and how to do it.

Check out the review below.

What is Investment?

Basically, investment is one of the strategic factors in economic activity. Investment is an effort of putting money/capital to make profit.

The party/person who makes the investment is usually called an investor. Investors, according to Nila Firdausi Nuzula and Ferina Nurlaily in the book “Basics of Investment Management” can be interpreted as parties who make investments, by buying financial assets expecting the price to increase when they sell their assets.

Investment According to the Experts

Here are some definitions of investment according to experts.

1. Reilly & Brown

According to Reilly & Brown, investment means a person’s willingness to allocate a certain amount of money in the present with the aim of getting revenue in the future. 

2. Dornbusch

Dornbusch defines investment as expenditure provided to increase/maintain components of capital goods.

3. Bodie, Kane, & Marcus

Meanwhile, Bodie, Kane, & Marcus define investment as a person’s willingness to allocate money or valuable resources now and hold it for a certain period of time to gain profit in the future.

Types of Investment

There are different types of investment. Below are some of them based on the time frame.

1. Short-term Investment

This type of investment is carried out in a relatively short period of time. Profits from short-term investment are usually expected to materialize within one to three years.

Given the short period of time, the returns from this type of investment will be smaller, such as investment in the stock market, short-term bonds, and certificates of deposit.

2. Long-term Investment

This type of investment takes at least more than three years to make profit. Investors can only enjoy the return of this type of investment, usually a minimum of five years to decades into the future.

However, the returns will also be much greater than the short-term investments. The long-term investments include stock investments, land purchase, gold investment, and mutual funds.

Investment Instruments

There are several investment instruments to gain profit from, ranging from instruments with relatively low risk to high risk. Here are some examples of investment instruments that you may consider.

1. Gold

The easiest and classic investment instrument is gold, be it in the form of gold bars, precious metals, gold or digital gold vouchers, and jewelry.

Because it is real or has a physical form, gold is the type of investment that is most favored by many people. In addition, gold investment is also very popular because this precious metal has a relatively low risk. In addition, gold also has a stable value and the price always increases every year.

2. Mutual Funds

This investment instrument pools assets from shareholders to invest in investment manager’s (MI) portfolios, who usually diversify the assets in securities like stocks, bonds, money market instruments, and the likes. This instrument is very suitable for novice investors.

3. Crypto Assets

Crypto assets are one of investment instruments that are increasingly popular and gaining popularity in recent years, both globally and in Indonesia.

If you want to invest in crypto assets, there are many ways to do it and the easiest one is to buy coins.

Usually, the best coins are those that are used by many people and have more potential to grow massively in the future.

4. Stocks 

Stock is a form of ownership in the issuing corporation. This instrument can also be interpreted as a form of capital participation for a business entity to operate their businesses.

This equity participation will give the party a right to get a slice of the company’s income, a right on the company’s assets, as well as the right to attend the General Shareholders Meeting (RUPS).

Usually, the higher the risk of a stock, the higher the profit can be earned, so accurate analysis skills are needed for the placement of capital for this investment instrument.

5. Deposits

Deposit is a fixed-term investment that includes the deposit of money into an account at a financial institution. Term deposit investments usually carry short-term maturities ranging from three months to a few years and will have varying levels of required minimum deposits.

Several deposit options available are time deposits, deposits on call, and deposit certificates.

We hope that this article will help you get familiar with investment and its instruments. Interested in trying one of these?

Stay tuned for the latest and most interesting reviews about crypto assets only at Indodax Academy.