Investments unite the world

Both centrifugal and centripetal tendencies are the basis of a modern world. The main uniting force of the modern international community is international financial investments. Investment classification is various, but its major flow is divided between three directions:

• direct investments;
• portfolio investments;
• bank credits.

Approximately 70% of international investments are redistributed between the USA, the European Union and Japan.

Investments in global meaning provide the functioning of the world market by the capital flow from less profitable (old) branches and countries to more profitable (progressive and dynamic). That ensures the world civilization progress at the present stage of human society development, financing the more innovative and perspective fields, technologies and the whole countries. Judging by the human progress in science, techniques and technologies, the living and culture standards investment mechanisms as the factor of world community dynamic development can not but considered as super efficient. How this mechanism which is able to change medieval countries into the leading countries of post-industrial world order in a several decades (Japan, China, hopefully- Russia) is formed.

International portfolio investments – are the capital deposit into the foreign shares or debt securities without the right to control investment objects. The main task of portfolio investment – is improvement of investment terms by offering the set of securities (on the assumption of successful combining). A new investment quality with pre-defined characteristics is only achieved in the process of securities portfolio formation. Thus, the securities portfolio is often intangible (electronic) substance, uniting many people of different nationalities- investors (jointed by their funds) and founders of joint-stock companies (jointed by stocks). From the investor’s position which is more interested to us in this material, portfolio investments are those instruments with the help of which the necessary investor’s profit is ensured in case of minimal risk. Usually portfolio investments are considered as the means of preserving the funds from inflation, and only in the case of venture deals- as the means of getting a real profit.

International direct investments. Under the conditions of international economic crisis the government of the majority countries, including Russia, implements a protectionism policy and some closing of national markets. However, the direct international investments are still the basic method of global investing. This method is used by commercial enterprises for getting profit on the foreign markets. For an investor, the funds allocated to the enterprise, will be the foreign investments, and for the country which receives investments- the foreign ones. As the direct investments presuppose the entrepreneurs’ investment activity, so the investor should be ready for an active participation in managing the foreign enterprise. Earlier entering the international investment market was the destiny only of prominent entrepreneurs and structures, now it is possible to invest any amount of money to the foreign enterprise, if it is demanded by the foreign enterprise. The direct investments excluding mediation of different structures (shares funds, stocks) provide not only a considerable income, which can be compared with entrepreneurial, but also higher risk comparable with entrepreneurial one.

International bank loans. The major modern banks are international transnational corporations; they are ready to grant a credit to a borrower who satisfies the requirements practically in any country of the world by means of its branches and representatives. At the moment transnational banks follow the global corporations, ensuring them with modern and actual bank services in this or that country. Naturally, the investor in this form of investment is bank institutions, and the given article serves to less institutional investors – private persons and small corporations. For them, international bank loans- are one of the sources of investment capital formation. This source is characterized by high charges and mandatory repayment. These terms make bank loans objectionable, but sometimes the only one source of investment capital. It should be mentioned that the world financial crisis of the present days was initiated by the non –credit process with investment banks (particularly mortgages) in the USA. Thus, the use of a bank credit for investment purposes make investments less profitable, and less reliable, because there are risks of out-of-date debt, leading to the bank penalties.

And, finally, the most profitable and consequently the most risky type of investment is Forex market. Due to these two factors the given market has the highest liquidity among investment instruments and the funds turnover. According to the data of the Bank for International Settlements, which conducts the appropriate monitoring, the daily deals volume on the Forex market exceeds 1.4 billion US dollars. The currency market is greater than all other markets in the world. Main currency market participants – are banks, exporters and importers, governments, institutional investors and the most interesting to us, the brokerage companies and private investors. The currency Forex market- is an off-exchange structure, i.e. it exists in the form of participants’ mutual calculations through the global fund communication, mainly by the Internet. Consequently, the currency market Forex- is the most democratic and less bureaucratized investment type. Using the leverage mechanism, the brokerage companies ensure an access to the market to any Internet user with an amount of 100-200 US dollars, as well as a rule free trading terminals and the necessary informational support. The income on the Forex market depends from an increase or decrease in the one currency rate against another one. If a person comes into a market and makes a deal just “at random”, his/her chances to get profit or to suffer losses will be equal to 50% to 50%. But if a person adds some knowledge and technique analysis skills to its choice, that brokers teach its clients as a rule, than he/she will shift the income ratio to his/her favor in one or another extent.

Thus, the modern financial system represents a wide range of investment instruments depending on the investment volume, its source and urgency, as well as purposes which an investor intends to achieve- the capital preservation or its multiple advancements. After that the characteristics of income and risk are selected, and only after that in accordance with the above mentioned, an investment instrument should be chosen.