Ngopisantuy.com – Get to know the types of investments with examples and explanations, Investment is one of the most commonly used concepts in the worlds of economics and finance. Indeed, the concept of investment refers to an investing activity in which the owner of the capital hopes to reap a variety of rewards.
The investor is the individual who makes the investment. People who invest in a firm are referred to by this word. What are the different forms of investments?
Stocks, mutual funds, peer-to-peer lending gold, time savings, Robo Advisor, unit linkages, currencies, and real estate such as homes and flats are all examples of investments. There are other popular investments outside of Indonesia, such as cryptocurrency.
Get To Know The Types Of Investments With Examples And Explanations
Furthermore, investment may be regarded from a variety of perspectives, including time span, effect, and source of finance. To satisfy your curiosity, the sorts of investments and their explanations are presented.
1. Investment Type Based on Time Period
Investments are classified into three sorts based on their time horizon: short-term, medium-term, and long-term. Short-term investments last less than a year, medium-term investments last between one and five years, and long-term investments last longer than five years.
2. Short-Term Investment Types
A short-term investment is one that will pay off in less than a year. Here are some examples of short-term investments to consider:
Many individuals believe that deposits may only be made for extended periods of time, such as ten years. However, deposits can be placed as early as three months.
Deposits provide a better advantage than typical savings since the interest rate is higher. There are other deposit options that allow you to withdraw money when you need it. Deposits are regarded as forms of investments for beginners due to the low risk.
You should be aware that deposit interest is determined by the Bank Indonesia reference interest rate or the BI 7-day (Reverse) Repo Rate.
Depending on the bank, deposit interest rates typically vary from 4 to 7 percent. You can choose a tenor ranging from one month to twelve months. Deposits are used as a sort of short-term investment. However, the longer the tenor, the greater the profit.
This sort of short-term investment is appropriate for people who do not want to incur risks because the money deposited by the client is also insured by the Deposit Insurance Corporation (LPS). Don’t forget about the 20% tax for individuals who keep their money on deposit.
Stocks are a versatile investment vehicle since they may be held for a short, medium, or long period of time, depending on your financial objectives.
If you want to create stocks as a sort of short-term investment, you may acquire shares from firms with strong reputation and robust finances, so that the selling price of the stock will be higher. The share price is high. The purpose is to generate profitable returns or returns.
When you buy in stocks, you can gain two benefits:
- Profit from rising stock prices is referred to as capital gain.
- Dividends are earnings from a company’s profits that are distributed to shareholders.
- Stocks may also be depended on as a medium and long-term investment because the benefits of holding shares for 3-5 years are considerable.
Forex, which stands for Foreign Exchange, is another very successful short-term investment. That is, the rate of exchange between one currency and another.
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This investment swaps currencies based on the current market price at the time of the transaction. Forex value can vary at any time due to market dynamics, making it a trading arena.
Forex trading is a high-risk investment, thus you must take a variety of precautions, including:
- Money management is a set of approaches for risk management in forex trading.
- Diversify your investments by investing in a variety of financial vehicles rather than putting all of your money in forex.
Examine your risk tolerance in light of the high risk/high reward aspect of FX trading. If you are a retiree, for example, you may not be able to play this instrument.
3. Short-Term Peer-to-Peer Lending
Peer to Peer (P2P) lending will connect lenders and borrowers via a platform or a platform that has been developed without the use of a bank as an intermediary.
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Consumer P2P lending and productive P2P lending are the two forms of P2P lending based on the type of borrower.
Because the borrowers are micro entrepreneurs, productive P2P lending is mentioned. Meanwhile, consumer P2P lending allows the borrower to spend the funds for whatever purpose they want.
Furthermore, the term of P2P loan varies; it might be one year, two years, or even a matter of days. You can select the one with the longest tenor if you wish to lend cash in consumer P2P lending.