Invest and how to protect funds

Investment ideas: where it is better to invest and how to protect funds

Stories where a novice investor wins fabulous amounts on the first try are an exception to the rule. In 99% of cases, a trial investment ends in financial failure. It’s just that no one boasts of such a result..

Where to find and how to choose the right profitable investment ideas so that they generate the desired income? More on this below.

What is an investment idea?

An investment idea is a concept of possible income that, if implemented correctly, will allow you to count on future profits. For example, buying shares of a company with the aim of making a profit on resale in 5 years is one idea. Opening a clothing store is also an idea. Each of them involves investing in a particular business.

You can invest in any promising asset:

  • stock values;
  • index funds;
  • CRYPTOCURRENCIES;
  • precious metals;
  • the property.

IN investment ideas always there are two defining characteristics.

The first is the risk of losing some money. The company’s shares may fall and the business may become unprofitable.

The second important feature is the payback period for investments. Sometimes it is determined in advance: buy shares and sell them in 5 years, grow the business after 2 years. And often an investor buys assets for an indefinite period and then analyzes the situation.

Timing and risk are the key characteristics of an investment idea. But none of them guarantee 100% of the expected income. That is, there is always the possibility of losing part or even all of the funds invested. Professionals play it safe and reduce the mentioned risks, and beginners, as a rule, do nothing, which is why they often lose deposits.

How to develop an idea yourself?

To determine an investment idea, the following is relevant:

  1. Closely follow market trends, actively read the news. Demand study, potential development niches. For example, during lockdowns around the world, the popularity of online learning platforms has skyrocketed. Also in recent years, ESG investing, the so-called green investing, has been gaining momentum.
  2. Monitor insider information, select solutions based on your data.
  3. Studying the market in detail and looking for companies that cannot cope with the financial burden is a potential candidate to acquire and promote a business. Here you can not do without fundamental analysis and assessment of growth prospects.

When the idea has matured (that is, there is an idea in which the funds will be invested), it is necessary to develop a business plan, determining the minimum amount and the payback period for investments. It is important to understand that conservative investors do not go the way of intraday trading and look only at long-term projects.

How to choose the right idea?

In the absence of resources to develop your investment idea, you can use the finished one. The choice of investment ideas depends on the objectives and appetite for risk. The most conservative option with guaranteed income and minimal risk is bonds. Investors who are willing to take risks for the sake of high rates of return are considering buying shares of various companies (such as VTB, Tinkoff, Finam).

Regarding the investment amount, in the case of stocks/bonds, the minimum threshold is the cost of a security. For structural thresholds, fees typically start at ₽300,000.

The scope of investment implies compliance with the basic rules:

  • use only free money (no credits and loans, there is always a risk of loss);
  • Before investing, it is important to assess the risks and potential return;
  • Remember to diversify your investments.

In order to minimize the risk of capital loss or income derived from it, professionals in this area distribute the contribution to the investment idea (for example, the purchase of shares) among different investment objects. The optimal formula looks like this:

  • 50% – conservative portfolio (real estate, bonds, precious metals);
  • 30% – moderate (business projects, promotions);
  • 20% – aggressive (cryptocurrencies, forex market).

What is the best place to invest money in 2021?

It is advisable to use proven methods of investing funds that work without problems.

The first option is shares on the stock market. However, it is important to consider that in Russia an individual cannot buy or sell them on his own – an agreement with a broker will be required (he works for a percentage of successful transactions). The advantages of this method are high profitability with competent market analysis, the disadvantages are the instability of the stock market and a 13% tax on profits.

The second option is mutual investment funds (PIF). The investor buys a share and the fund manages the money, the activity of which is regulated at the state level. The interest rates are higher here, the risk is moderate, the minimum investment amount is ₽1,000, but the mutual funds do not provide any guarantees (this must be remembered). The income level reaches 15-30% per year (13% tax is also paid).

How can an investor protect his investments from a market downturn?

When investing in any promising asset, it is important to remember that there is always a chance that its value will crash. Robert Kiyosaki has spoken of this often in recent weeks as he warns of an imminent financial market crash. Lev Kravets, chief analyst at Esperio, agrees with him: he predicts a serious stock market crash in the next 6-12 months. The expert recommends that investors refrain from the “New Year’s rally” and concentrate more on defensive investments, that is, invest in such assets:

  • fixed income instruments (short public and corporate bonds);
  • stocks of dividend aristocrats from non-cyclical industries (but allocate a small portion of the portfolio to them);
  • gold.

It is difficult to predict the dynamics of exchange rates, so it is better to keep the portfolio in the same proportions of the main currencies. If you wish, the Swiss franc and the British pound can be included in the list.

As for the stock market of the Russian Federation, it will not avoid falling either. But, according to Lev Kravets, the collapse will be much smaller than in 2008. However, previously, the Russian stock market was also underestimated compared to the US or EU markets. And that didn’t stop him from getting stronger.

Disclaimer. Investing in any financial asset carries the risk of losing capital. Nothing in this text can be considered an investment recommendation or an offer to buy/sell any financial instrument. For all their actions in the stock market, each investor independently bears full responsibility.