Investment and business

Last time I wrote that investments are investments in business. But I didn't define the line, the difference between investment and business itself.

The line between these concepts is often blurred. For example, in the world practice, it is common for a company's managers to simultaneously be shareholders and co-owners of the company's shares. In addition to their salary, they can count on dividends and an increase in the share price if their business is successful.

The main criterion for differentiating investments from the business itself is the amount of time you spend on activities: decision-making, management, control, and other activities within the business. The more time you spend, the closer your activity is to business; the less time you spend, the closer your activity is to investment.

When you are engaged in business, you first of all invest your TIME in it. Cash investment in a business can be significant, or it can be minimal. There are many examples of how a business starts with almost zero initial financial investments.

If you are engaged in investment, then you, on the contrary, first of all, invest your MONEY. And the cost of your personal time can be both minimal and significant.

Therefore, later in the course, I will call investments in a business that does not work for YOU, which works without your participation. I will refer to the so-called "production investments" not as investments, but simply as business investments. For example, I will not consider as an investment the purchase of a new chainsaw for the construction of cottages (the chainsaw itself does not bring money, you will still have to build cottages) or the purchase of beads for weaving jewelry from it (the beads themselves will not give money, the jewelry will still have to be woven). And in General, any purchase of assets for a business in which you PERSONALLY will have to WORK to get a return in monetary terms.

There is nothing wrong with investing in your own business (which is often called "production investment"). However, to analyze the utility of production investments, they will have to be considered not according to the laws of investment, but according to the laws of business (do you need a new chainsaw, or can you manage without it?). Therefore, we will leave such investments outside the scope of our course, and will only consider such investments in which the cost of your own time tends to be minimal.

There is no need to do business yourself

It is not easy to organize your own business. It requires experience, effort, daily time spent, stress, risks, communication with clients, subordinates, the tax office, and other business-related features. Moreover, not everyone is predisposed to engage in business...

I'm not trying to talk you out of your business. However, I would like to note that there is no need to personally engage in business in order to increase your funds.

Imagine that you have already built a business machine for the production of money, confidently increasing the money invested in it. If you invest 0, you will get 0 in a year. And if you invest ,000, you will get ,000 in a year's time.

At the same time, the capital of tomorrow is greater than the capital of today. Remember that we are interested in making a profit.

What do you want to do in this case? I assume that you will want to increase the amount of investment. For example, you can invest 0,000 and get 0,000 a year later.

But what if you don't have a free amount of 0,000 yet? But do you know that this amount is available to your neighbor? I think you will come to your neighbor and offer a deal: Lend me 0,000 now, and I will pay you back in a year, say, 0,000. You will not be left behind. After all, you already have a money machine that, as you know, will help you make 0,000 a year. Of these, you will return 0,000 to your neighbor, and ,000 will be your net profit.

Or perhaps you will tell your neighbor about the potential risks and profits of your business and offer to become its co-founder. That is, to give you money not in debt, but on the terms of receiving a share of the future profits of the business. And it will also be mutually beneficial. Both you and your neighbor.

The owners of any working business think the same way. If a profitable business allows you to increase the scale, then a competent entrepreneur will seek to attract other people's funds for business development, the funds of investors.

Business is interested in your investment. When Western consultants analyze the work of firms, they look at whether the firm chooses all the available debt resources at a given level of development or resources that can be attracted to the business through an additional issue of shares. If not, the advice will be to increase the activity of attracting borrowed or equity funds to the business.

So: the business needs investment and is ready to share the profit with you. In order to invest in a business, you don't need to do it yourself.

And what is even more important (and we will talk about this later), the number of such businesses that want to attract your financial resources to accelerate their development is very, very large. Perhaps you don't even realize how big and varied it is yet.

All the attention is on business!

Why do I so persist in drawing your attention to the fact that there is a business behind the investment? The fact is that the success and reliability of your investments primarily depends on the success and reliability of the business that is behind these investments.

Next, we will talk about various forms of investment, but I want to point out that the main thing is not the form, but the content. What looks very similar on the outside can be radically different from each other in essence. There is always a business behind the investment, this business can be good or bad, and this is what determines the success of your investment. Important differences that are usually not visible at first glance.

For example, imagine two very similar construction sites. Two different construction companies are building residential buildings next to each other. Fences were put up, ditches were dug, people and equipment were working. Colorful posters with information about how and where you can buy apartments in this building under construction are hung on the fences. However, time passes, and one of the construction companies fulfills its obligations, builds its house, and rents it to future residents. And the second company turns out to be another social initiative, whose depositors will be left without housing and money, and will go to meetings with posters for many years to come.

Or, for example, you buy bills for investment purposes-beautiful pieces of paper with watermarks, signatures, and seals. They may look similar to each other. But behind one bill there is a reliable business that will fulfill its obligations, behind another bill there is an office that will burst and will not fulfill its obligations.

If you buy and sell shares over the Internet, the external differences will be even less noticeable. In a long list on the monitor screen, you will see the names of many companies ' shares. With a few mouse clicks, you can select a stock you like from the list, view previous price movements on the charts, and finally buy it. The choice is huge. But how to choose, because everything is so similar on the screen? And then the value of some stocks will go up and make you a profit, and the value of others, on the contrary, will fall and lead you to losses.

Which is better – direct investment in capital or buying shares on the stock exchange? Is it more profitable to invest in bonds or bills of exchange? Or maybe it is better to keep money on a Bank Deposit? Which is more reliable - mutual Funds (mutual funds) or OFBU (General funds of banking management)? Such questions can often be heard from novice inexperienced investors. The correct answer – all this is not so important. More importantly, which business is behind venture capital investments or stocks? Who issued bonds or promissory notes? What kind of Bank offers you to open a Deposit? And who and on what principles manages the mutual Fund or OFBU that interests you?

Unfortunately, I have repeatedly had to deal with people for whom the main criterion for investment was the quality of printing of advertising brochures of the company or the frequency of flashing ads on TV channels. The end of such investments is usually sad.

So, I tried to explain what investment is, and to focus your attention on the fact that any investment is a business. Whether I succeeded is up to you. Next, we will talk about what types of investments are often confused with investments.
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