Types of investments - classification according to the term of investments, profitability, risks and other nuances. Investment Risk What accounts are high investment risk

Investment risk - the probability of financial losses in the course of investment activity. These include lost profits or loss of capital invested in the project.

Investment risks are classified by types, sources of occurrence, forms and areas of manifestation.

Types of risks

• Inflationary - losses as a result of the loss of the real value of investments with the preservation or growth of the nominal value.
• Deflationary - losses due to a decrease in the money supply in circulation.
• Credit - losses as a result of default by the borrower.
• Functional - financial losses due to errors in the formation and management of the investment portfolio.
• Operational - losses as a result of personnel errors, equipment failures, emergencies.
• Market - a decrease in the value of assets as a result of fluctuations in the value of shares, exchange rates, commodity prices and bank interest rates.
• Liquidity risks - the inability to release investments in a short time or lack of funds for payments to counterparties.
• Selective - the wrong choice of an object for investment.
• Country - the probability of losses due to the unstable socio-economic situation in the country where the investment objects are located.
• Risks of lost profits - losses as a result of non-fulfillment of activities that could bring additional income.

Classification of risks by sources of occurrence

• Market (systematic, non-diversifiable) - the probability of losses arising for all objects and forms of investment.
• Specific (non-systematic, diversifiable) — risks inherent in a particular investment instrument or direction.

Forms of manifestation of risks

• Risks of real investment associated with rising prices for goods, interruptions in the supply of materials and equipment, and the choice of an unscrupulous contractor.
• Risks of financial investment associated with changes in investment conditions and the wrong choice of financial instruments.

Areas of risk manifestation

• Economic risks. Factors affecting the economic component of the project: budget policy, the state of the economy, non-fulfillment by the state of its obligations (default, termination of contracts).
• Technical and technological risks. Reliability of equipment and technological processes, level of automation and other factors affecting the technical and technological component of the project.
• Political risks. Changes in the political situation, elections, the introduction of administrative restrictions on doing business, sanctions, interstate conflicts, separatism and other factors that affect the political component of the project.
• Social risks. Implementation of social programs, strikes, the emergence of social tension, personal factors and circumstances affecting the social component of the project.
• Environmental risks. Changing environmental conditions, carrying out environmental programs and actions. This includes environmental pollution as a result of production activities and accidents, natural disasters, the deterioration of the epidemiological situation, the spread of pests and diseases of agricultural crops.
• Legislative and legal risks. Inconsistency imperfection of the legislative base and tax system, lack of independent arbitration and legal proceedings, amendments to the legislation.

Any investment of funds involves a certain amount of risk, and the greater the potential return on investment, the greater the risk.

The investment risk lies in the fact that the money invested in the investment object will not return back in the same amount (and with especially risky investments, they may not return in full), or return, but will not bring any profit (in this case this will be called the risk of lost profit).

Reducing the risk of investments is achieved in various ways, the main of which are the diversification of investments and hedging of transactions. It should be understood that the price for risk reduction is always a decrease in possible profit, and one of the main tasks of any investor is to find the very golden mean in the ratio of risk and profit, in which he can receive, if not astronomical, but quite stable income from invested funds.

All main types of investment risks can be classified according to three main features:

1. By areas of manifestation
2. According to the forms of manifestation
3. By origin

The classification of all risks associated with the process of investing funds can be represented as follows:

Let's take a closer look at each of the designated points and start with a classification by application. In this section, it is fashionable to single out the following main types of risks:

1. Legislative and legal risks, as the name implies, are associated with the current legislation. They may arise due to the imperfection of the current legislation, both in general and in certain areas.
2. Environmental risks are related to the impact that the environment can have on investment objects. These risks, in turn, are divided into three main sub-items:
   • Technogenic risks are associated with various kinds of emergency situations and accidents at industrial facilities that can lead to significant environmental pollution (for example, at chemical or nuclear industries).
   • Natural and climatic risks are associated with such factors as extreme weather conditions (droughts, frosts), climatic conditions, natural disasters (earthquakes, tsunamis, floods, etc.), lack of necessary minerals.
   • Social risks may be associated with such phenomena as, for example, the incidence of various infectious diseases among the population, on which the object of investment may depend.
3. Social risks depend on such factors as established traditions (violation of which is fraught with consequences), the level of dissatisfaction of the population with the current state of affairs (which can result in such consequences as strikes, strikes and riots). This type of risk also includes everything related to the so-called human factor.
4. Political risks are related to the impact that current government policy may have on the investment object. So, for example, aggravation in interstate relations can have a very negative impact on the activities of various kinds of joint ventures. In addition, such factors as the level of corruption in the echelons of power, a change in the political course in the country, the level of publicity, etc. can also affect the object of investment.
5. Economic risks include all factors related to the economic situation in the country. These include defaults, crises and other shocks in the economic life of society. This also includes all the risks associated with the imperfection of the existing taxation system.
6. Technical and technological risks. This includes everything that is somehow connected with the technical side of the organization of production (which is the object of investment). These are equipment, technological processes of production, development of design and technological documentation.

According to the forms of manifestation, the main types of risks can be divided into the following main groups:

1. Risks of financial investment
   • Poor choice of financial instruments. Everything is simple here, they chose bad stocks - they got a loss (well, or they didn’t get a profit).
   • Unforeseen changes in investment conditions are also a source of risk of not receiving (or not receiving) the planned profit. For example, a change in a previously agreed percentage of profits received can hurt the investor's pocket.
2. Risks of real investment
   • Interruptions in the supply of materials and equipment. Raw materials were not delivered on time due to poor logistics, which means that they did not release a batch of goods on time and, as a result, suffered losses.
   • Rising prices for investment goods
   • The wrong choice of a contractor is typical for investing in various kinds of objects under construction. They chose an incompetent or dishonest contractor and, as a result, received a significant delay in the delivery of the facility. And this, in turn, delays the commissioning and the beginning of the payback, and then the profitability of the production facilities under construction (or another facility).

And finally, according to the sources of occurrence, investment risks are classified as follows:

1. Systemic risk, also known as market risk. It is typical for all investment objects and all market participants in general. It cannot be influenced in any way, and it belongs to the category of non-diversifiable.
   • Inflationary risk arises when the inflation rate is approximately comparable to the growth of the company's income. It is fraught with the fact that inflation will simply block all income from investment activities or even lead to a loss.
   • The risk of changing the interest rate comes down to the fact that the rate set by the Central Bank of the country may be increased. This, in turn, will be reflected in an increase in the cost of loans for enterprises and, as a result, in a decrease in business profits. It negatively affects the stock market as a whole.
   • Currency risk occurs when the object of investment, one way or another, is associated with a foreign currency. It is expressed in the possibility of adverse changes in the foreign exchange rate.
   • Political risk has already been described earlier, but it can also be included in this category. As mentioned above, it can include all the factors one way or another related to changes in the political situation in the country and affecting the object of investment.
2. Non-systemic risk is also called non-market risk. Characteristic for a separate market participant (investor) and (or) for a separate investment object. Therefore, for each individual object, it is different, and, therefore, it can be minimized through diversification.
   • Industry risk is characteristic of the industry as a whole. All enterprises belonging to a particular industry are subjected to it simultaneously. It can be minimized by simple diversification, which involves the choice of investment objects belonging to different industries that are weakly correlated with each other.
   • Business risk takes place in case of illiterate or irrational management of an enterprise, which results in a decrease in its profitability and market value.
   • Credit investment risk arises if an investor uses credit funds. There is a risk of default on the loan if the investment does not bring the planned income.
   • Country risk arises when investing in objects located on the territory of other countries and dependent on the stability of the political and economic situation in them. The more stable this situation, the lower the risk, and vice versa, with the destabilization (deterioration) of the political and economic situation in the country of the investment object, the risk increases.
   • The risk of lost profits lies in the fact that for some reason the potential profit will not be received (or not received at all).
   • Liquidity risk consists in the possible difficulty of converting assets into cash. The easier and faster it can be done, the higher the liquidity and, accordingly, the lower the risk.
   • Selective investment risk is related to the fact that an investor can choose from several objects one (or those) that will bring potentially less profit (or no profit at all, or cause a loss).
   • Functional investment risk is associated with incorrect selection of investment objects (investment portfolio) and incorrect (inefficient) management of this portfolio.
   • Operational investment risk takes place in the event of various kinds of failures and errors in the conduct of operations for investing funds. In the case of investing in the stock market, operational risks may arise due to the fault of the broker (for example, due to malfunctions in its software).

The main ways to minimize investment risks

Above, we have already mentioned two ways to minimize the risks that arise when investing. It's about diversification and hedging. At the same time, diversification refers to the formation of an investment portfolio as a whole, and hedging is associated with each financial instrument included in the portfolio separately.

Diversification

This way of minimizing risks works on the principle: do not put all your eggs in one basket. Diversification involves the formation of an investment portfolio in which the investor's funds are divided between different investment objects with a low correlation between each other.

Correlation in mathematics is the degree of dependence of two quantities among themselves. The more one of the quantities depends on the other (that is, a change in one of the quantities, one way or another, causes a change in the other), the higher the correlation between them. And vice versa, the less the interdependence between the quantities, the less their correlation.

For example, when forming a portfolio on the stock market, it includes not only shares of various companies, but also make sure that they, if possible, belong to areas of activity that are independent of each other. After all, if, for example, a portfolio is made up of the shares of only seemingly super-profitable oil producing and oil refining companies, then it will be highly susceptible to fluctuations in the oil market as a whole.

I advise you to read more about diversification in these articles:

Hedging

When the purchase of a particular financial instrument is accompanied by the simultaneous sale of a derivative for it (or, conversely, the sale is accompanied by a purchase), one speaks of risk hedging.

Derivatives are derivative financial instruments such as futures or options. For example, for shares of a particular company, a derivative financial instrument will be a futures on them.

Hedging is analogous to insurance and protects a transaction from unforeseen losses, while a possible loss resulting from its implementation is a kind of insurance premium or payment for the absence of risk.

A simple example is hedging the currency risk arising from the purchase of a foreign currency by simultaneously selling futures for it (with full hedging, the volumes of transactions for buying and selling must be equal). Let's say you have to transfer part of your funds into a foreign currency, but you are afraid that you may incur a loss due to the fact that the currency you bought will depreciate greatly over time. Then, you buy a currency while simultaneously selling a futures contract for it (in the same volume).

If after a while the foreign currency you bought really falls in price, then this loss will be completely covered by the profit of a short position in the futures, and you will remain with your own.

If the currency you bought suddenly increases in price, then you, in fact, will lose part of your profit, expressed in the difference between the purchase rate and the current increased rate. However, this loss will be nothing more than a payment for the absence of the risk of losing, where a lot of money is in the event of a depreciation of the purchased currency.

Setting loss limit orders

Finally, no matter how trite it may sound, one of the ways to minimize the risks on open positions is to place a Stop Loss order. An investor must always be aware of how long he intends to keep a losing position open.

The option to hold the position until the end is far from the best in terms of risk minimization. After all, the price of a financial instrument can vary widely, which, along with a large leverage, can have disastrous consequences for an investor's trading account.

When should a losing position be closed? This question actually has a fairly simple answer: a position should be closed when all the prerequisites that led to its opening disappear. For example, if a position was opened on the basis of a breakout of a support or resistance level, then stop loss should be closed if the price returns back beyond the level (thus leveling the breakout signal).

Today we will analyze investment risks inherent both in investing in general and in the stock market in particular. To begin with, you should remember one simple but very important truth:

Risks are inherent in any type of activity without exceptions,
and even more so - investing!

Doesn't exist anywhere 100% guarantee safety of your capital, even if it is insured for the entire amount. This should be accepted as an axiom. In addition, there is enough evidence in the entire history of monetary relations between people to be convinced of the reality of investment risks.

The concept and types of investment risks

In the language of finance textbooks, investment risks are possibility of loss of invested capital its initial value (in part or in full) due to economic, political, internal (corporate) or other reasons.

Types of investment risks

There are two main categories of risks when investing money in a particular asset:

• Market risks.
• Non-market risks.

Market- these are the risks that depend on changes in the market as a whole. For example, a change in legislation, an economic course in the state, etc. Influence them by a single investor can not.

Non-market- these are the risks that are associated with the specifics of each individual investment industry or individual asset, investment instrument, as well as the actions of the investor himself. Such risks the investor can and should analyze and minimize as much as possible in order to at least save the money invested.

Market risks

Among the market investment risks in the stock market, the following can be distinguished:

• Economic. These include, for example, a change in the interest rate by the Central Bank of the state. For example, if it rises, then loans for enterprises become more expensive. This, in turn, leads to a decrease in profits (increase in losses) of a business using lending.
• Political. As a rule, global political changes directly affect the economy of any country. Such investment risks are possible when sanctions are imposed on the state, war, change of government and political system.
• inflationary. In the case of high inflation rates within the country, the value of the profits of enterprises within it decreases. This can lead to the fact that having invested a certain amount in the stock market and having received a percentage of profit less than the percentage of inflation, you will actually incur a loss, since you can buy fewer goods for the amount received as a result of investment activity than at the moment when you started investing .
• Currency. These risks are directly related to the first two, as they reflect the economic and political situation within one country in relation to another, which is expressed in the exchange rate of the national currency against the currency of another country.

We remind you that a single investor cannot influence this type of investment risk in any way.

Non-market risks

Non-market risks include the following:

• Credit. Today's abundance of advertising with high percentages of income on the one hand and all sorts of tricks of banks on loan offers on the other - more and more often lead to such risks. Their essence is as follows: an investor took a loan and invested in some asset, but there is a possibility that the asset turned out to be of poor quality, or the nominal value of the invested capital decreased (capital loss), or the return on the asset turned out to be less than planned. In such a situation, the investor runs the risk of not repaying the loan obligations assumed on time (or not in full).
• Entrepreneurial (management). This type of investment risk can reduce the value of acquired shares, bonds and other assets due to the inability of the issuer's management (the company whose shares the investor has acquired) to cope with emerging problems. The company begins to reduce the rate of profit growth, or suffers losses because of this.
• Niche. There are situations when a particular niche (branch, industry) begins to suffer losses or slows down its development due to some reasons (usually economic or political). Even though the company's fundamentals may be healthy, it may fall in value along with the rest of the market. An example of such a situation is the decline of the oil industry due to the low level of demand for products and the decline in prices due to competition in the market.
• Liquid. This risk manifests itself in cases where the investor cannot quickly turn the purchased assets into money. This can serve as a cause of losses (due to changes in the exchange rate, for example), or lost (lost) profits.
• Private. This type of risk directly depends on the level of financial literacy of the investor himself, his ability to competently create and manage an investment portfolio. This also includes the ability to assess, analyze and minimize investment risks in general.

Minimization of investment risks

Above, we have listed the general categories of risk for an investor and made them a bit more specific. Now let's talk aboutpossible ways to minimize non-market risks.

• In the first place, it is worth highlighting education and self-education in the field of investment. The more you know, the less likely you are to fall victim to one of the risks mentioned in this article. There are tons of free and paid methods, from books in libraries to step-by-step tutorials. We also recommend that you watch the video tutorial on our website about (link will open in a new tab).
• Niche risk can be reduced to a minimum, properly compiling your investment portfolio, which will include companies, instruments from different segments of the economy and industries.
• Liquid risk can be minimized by choosing the most liquid assets. These can include shares of international companies on the stock market(assuming you are correct).
• Credit risk can be completely avoided by not using credit funds for investment purposes. For novice investors, investing credit money is more than unreasonable! If you are confident in your knowledge, skills and have invested credit money in a proven asset, then try to have a reserve with which, in case of unforeseen circumstances, you can pay off your current debt without negative consequences in the form of penalties and fines on overdue loans.
• Management risk can be minimized through detailed study of fundamental indicators selected company (investment instrument) not only at the moment, but also in the historical perspective for 5-10 years. For the stock market is the study of financial statements of companies and listening to audio recordings of quarterly (annual) reports of directors.

Investment risk- this is the probability of complete or partial loss of one's investments or not receiving the expected income (profit). Any investment is risky. Moreover, uninvested money is also at risk - the risk of depreciation due to inflation. Even your money in your pocket is at risk because it can be lost or stolen by a pickpocket. Thus, money and investments of money are always at risk.

Investment risk can be treated in different ways. There are two extremes. Some investors are afraid of risk like fire. One thought about the possibility of losing at least one ruble horrifies them. Such investors try to invest only in the most reliable and risk-free assets (although these do not actually exist in nature). Usually they do not want to hear about the stock market and keep money either “under the mattress” or on a deposit in Sberbank. Others, on the contrary, take a lot of risk or do not think about risk at all, focusing only on high income. They invest their money in Forex, PAMM, HYIP and even in, hoping to jump out in time (although the latter are most likely simply financially illiterate).

The first investors lose the opportunity to receive a high income, the second have the opportunity to lose all investments.

Types of investment risks.

Investment risks can be divided into two types: systemic and non-systemic.

Non-systemic (diversifiable) risks are the risks inherent in a particular company or industry. Such risks include business risk, financial (credit) risk, operational risk.

Business risks— risks associated with poor management of the company and management errors. Poor management can lead to falling sales and profits, which in turn can cause securities to be sold and their market price to fall. In special cases, extremely incompetent actions of management can lead to the bankruptcy of the company and the complete depreciation of its securities.

Credit (financial) risk associated with the inability to fulfill their financial obligations - to pay loans, bond coupons, debts to suppliers. The greater the debt load, the greater the credit risk. The inability of the company to service its debt leads to default, and further may lead to the bankruptcy of the company. To assess the creditworthiness of a company, you can use the credit ratings of rating agencies (Fitch, Moody’s, S&P) or conduct an analysis yourself based on financial statements.

Operational risk is the risk associated with asset transactions. An investor usually buys assets through an intermediary - a management company, a bank. Broker's mistakes, management company fraud, bank failures are operational risks.

You can reduce systemic risks with the help of - the purchase of assets that are not related to each other, for example, shares of different companies. If your portfolio consists of one stock, then a 50% drop in the stock will result in a 50% drop in the portfolio. If your portfolio consists of 10 stocks, then a 50% drop in one stock will cause only a 5% decrease in the value of the portfolio. You can diversify your portfolio in a variety of ways:

• by asset class: stocks, bonds, gold, money, real estate
• by currencies: dollar assets, euro assets, ruble assets, Swiss franc assets, and so on
• by country: American assets, European assets, Japanese assets, Australian, Russian, Chinese, etc.
• by capitalization: stocks of the largest companies (blue chips), mid-cap stocks, small-cap stocks
• by sector: shares of oil companies, shares of the electric power industry, shares of mechanical engineering, government bonds, municipal bonds, corporate

Systemic (non-diversifiable) risks- these are the risks that are caused by factors affecting the entire market as a whole, on all securities. Such risks include currency risk, market risk, interest rate risk, inflation risk, random risk.

inflation risk is the risk of reducing purchasing power. The risk that rising consumer prices will reduce real investment returns. If prices rise, then over time, 100 rubles will no longer be able to buy as many goods as before. If inflation rises faster than investment returns, in real terms, investors suffer losses and the purchasing power of their capital decreases. The most exposed to this risk are investments with fixed income (deposits, bonds, certificates) and investments without income, that is, money on demand deposits and cash “under the mattress”. Real estate is best protected from such a risk, as it grows with inflation.

Currency risk is to change the exchange rate of the ruble against a foreign currency. If the ruble strengthens, this reduces the profitability of investments in foreign stocks. On the other hand, the weakening of the ruble, on the contrary, increases the profitability of investments in foreign assets. In addition, with a weak ruble, Russian assets become cheaper for foreign investors, and therefore more attractive.

The fall of the ruble causes an increase in prices for imported goods, which in turn causes an increase in consumer prices - an increase in inflation. To reduce inflation, the Central Bank begins to raise rates, so there is an interest rate risk.

Interest risk is to change interest rates that affect the market value and return on investment. In Russia, the main interest rate is the key rate of the Central Bank - the interest rate at which the Central Bank issues loans to other banks. The key interest rate in Russia from September 2013 to November 2014 increased from 5.5% to 9.5%.

Changes in the interest rate have the greatest impact on fixed income instruments - deposits, bonds. An increase in the interest rate causes an increase in interest rates in the market - interest on deposits and yield on issued bonds begin to grow. At the same time, the prices of bonds that have already been issued are falling so that their yields correspond to the current yields in the market. The risk of bank deposit holders is that they receive interest at the old interest rates, that is, they receive income lower than those who open deposits now.

Interest rates also affect. An increase in interest rates means more expensive loans for businesses, which raises concerns about profit growth and business stability, so some investors, when interest rates rise, sell shares and switch to bonds, on which yields have increased. Lowering interest rates has the opposite effect - selling bonds and converting money into stocks.

Liquidity risk means that the investor will not be able to sell the asset quickly and without loss and get cash. Assets differ in terms of liquidity - highly liquid assets are always easy to sell, they always have many buyers. It is more difficult to sell low-liquid assets, since there may be few or no buyers at all. The liquidity of securities is easiest to assess by trading volume - the larger the volume, the more liquid the security. Trading volume can be viewed on the website of RBC, Moscow Exchange or Finam. Some of the most liquid stocks are blue chips - Gazprom, Sberbank, Lukoil, Magnit, VTB, Norilsk Nickel. As an example of low-liquid shares, we can cite shares of the third echelon - VHZ, MGTS, WTC. Low liquidity of securities also means large spreads - a large difference between the purchase price and the sale price. Therefore, if you have to urgently sell low-liquid paper, you risk losing in price, because in order to sell it faster you will need to set a low selling price. Another example of a low-liquid asset is real estate, since finding a buyer and processing documents usually takes several days, or even weeks.

Random risks- these are risks associated with unpredictable events, for example, major man-made disasters, changes in legal regulation, political upheavals, revolutions, military conflicts.

Market risk

Market risk plays a special role in an asset allocation strategy. Market risk refers to the risk of a decline in the value of an asset. Market risk is assessed using volatility, that is, the degree of fluctuation in the market value of an asset. The larger the range of price fluctuations, the riskier the asset. For example, a stock whose price fluctuated from -5% to +5% over the year is less risky than a stock whose price fluctuated from -10% to +10%.

Volatility is mathematically calculated using the standard (root mean square) deviation formula. The standard deviation shows how widely the value of an asset is spread relative to its average price.

A low standard deviation indicates that asset prices are close to the average price and the range of fluctuations is small. Such an asset is low volatile, which means that its risk is low. A high standard deviation, on the contrary, means that the prices of an asset deviate strongly from the average price, which means that this asset is highly volatile and has a high risk.

How to reduce market risk?

Let's look at the historical performance of US stocks and bonds.

This table shows the returns on US stocks and bonds for periods of one year, 5 years, 10, 20, 30 years.

The spread of annual stock returns over a one-year period is very large - from +67.8% to -46.6%. The range of yields on bonds is less - from +32.8% to -8.3%. That is, the risk of making a loss on short (1-3 years) investment periods for shares is higher than for bonds.

Now look at the spread of stock returns over a 20-year period. It is much smaller from +17.4% to 2.6%, that is, not a single 20-year period for shares was unprofitable. Also note that in all periods, the average return on stocks was higher than the average return on bonds.

Thus, in short periods of investment, it will be more preferable to invest in bonds or deposits, and in the long term, especially taking into account inflation, it is much more profitable to invest in shares. The longer the term of your investment, the larger share of the portfolio should be occupied by stocks. Stocks need to be held for a long time. The longer the investment period, the lower the probability of a loss.

Another way to reduce market risk is proper distribution of assets in the briefcase. For example, a portfolio consisting of 50% stocks and 50% bonds had a lower return compared to stocks, but the risk was significantly reduced. Of all five-year investment periods, the 50/50 portfolio sank the most by only 3.2%, while the all-equity portfolio sank 12.5%.
Moreover, proper asset allocation can not only reduce risk, but can also increase portfolio returns.

For an investor, the biggest risk is the risk of losing capital. Not only in nominal terms, but also in real terms, that is, in the sense of the loss of the purchasing power of capital and the income that it brings. Inflation annually reduces the purchasing power of capital if it does not grow. Therefore, the main risk for the investor and his constant headache is inflation.

Another equally important risk for an investor is the risk of making a mistake, making the wrong decision.

How to reduce these risks? Inflationary risk can be reduced by investing in assets that outperform inflation. The risk of making a mistake can be reduced by constantly improving your investment skills and knowledge. The more you know about a particular investment instrument, the more your competence in a particular area of ​​investment, the less your risk.

In addition to the probability of the risk itself, it is also necessary to assess the size of possible losses. The investor should strive not to take on risk and avoid it. It is better not to lose money than not to receive income.

And every investor should remember that in the stock market the risks of making losses are inseparable from the possibility of making a profit.

We all save money. A schoolboy saves for a new smartphone, a student for a car, a young family for an apartment (or more often for a down payment for a mortgage), a worker for a vacation, and a pensioner for a funeral. And no matter how tense the economic situation is, the money somehow accumulates. Otherwise, why are there so many iPhones and expensive cars around?

But what most people don't realize is that when the accumulated money is under the pillow, it subtly diminishes. Every night a "savings killer" comes and steals a small part of our savings. And this killer's name is Inflation.

The official inflation rate in Russia for 2015 is almost 13%. But we know that it is not weakly underestimated (those who remember the prices for products in 2014 understand this especially well). The real inflation rate for 2015 was definitely over 20%.

Thus, all our savings depreciate at a rate of at least 20% per year or 1.65% per month. So, now most of the ways of investing do not help to increase your funds, but at least offset inflation a little.

In such a situation, it is very unwise to keep money under the pillow. Any free money should work. But how to invest them as reliably and profitably as possible?

Investing is not that hard.

I think everyone understands what investing is. When investing, you make your funds work. That is, you invest money, expecting to receive even more money in the future.

But we must not forget that investing entails risks. Instead of the expected profit, you can get a loss or even lose all your money.

Therefore, the main rule of investing is risk diversification. According to this rule, you must break your savings into parts and invest them in different investment projects.

For example, let's say your investment portfolio is $100,000. Then you need to choose a few investment instruments that are suitable for you. Suppose you have chosen mutual funds, PAMM accounts and backing and HYIP projects. Now you will need to distribute your portfolio between instruments depending on how much you are willing to risk.

Let's say that you are configured for moderate risks and distribute money as follows: mutual funds - 40%, PAMM accounts - 40%, backing - 10% and HYIP projects - 10%. Now you need to apply the principle of diversification within each chosen way of investing.

That is, you will need to select several different PAMM accounts and distribute your 40% of the portfolio between them. The same must be done with other chosen ways of investing.

In order to comply with this rule, you need to use several tools that can multiply your money. I have selected 12 of the best ones for you.

We compare the 12 best ways to invest.

I not only selected for you the 12 best ways to invest, but also compared them with each other. For comparison, I chose several parameters that I decided to evaluate on a 10-point system, where 1 is the lowest score, and 10 is the highest.

Comparison of the best ways to invest.

The following options have been selected:

• Simplicity. This parameter characterizes how easy it is to understand this type of investment, understand the principle, find a suitable company and make a deposit.
• Yield. Here the average return on investment will be estimated. Most often, this and the following points are interconnected: the higher the yield, the higher the risks.
• Reliability. This parameter characterizes the riskiness of the analyzed investment instrument.
• Entry threshold. Shows the minimum amount you can invest.
• Liquidity. Estimates how quickly you can withdraw your deposit, and what losses you expect if you withdraw money prematurely.
• Passivity / activity- this parameter shows how passive this type of income is. That is, 10 points means “invested and forgot”, and 1 point means that in order to get the maximum profit, you will have to spend extra time and effort.

Of course, all my assessments will be subjective and I think that many readers will not agree with them.

1. Bank deposit.

A bank deposit is the most understandable and simple way of investing for an ordinary person. Even any grandmother understands how everything works. After all, even in the Soviet Union, in which there was no investment, people kept money on passbooks. And one of the heroes of the popular Soviet film called on fellow citizens to keep money in savings banks.

All you need to do to make a deposit is to choose a bank and come there with your passport and money. What could be easier? I bet 10 points.

At the same time, the profitability of a bank deposit is not high. At the moment, deposit rates range from 7% to 12.5%. I think this is one of the lowest returns of all investment methods. Deserves 1 point

But you can be sure of the reliability of your contribution. The deposits are insured by the state. Even if you plan to invest a large amount, in order to insure that your bank's license will be taken away, you can break the amount into small parts and invest in several banks. In this case, even if the bank is deprived of a license, and your deposit was less than 600,000 rubles, then you will be compensated for both the deposit and interest. 10 points for reliability.

You can start investing with an amount of 10,000 rubles. This is not much at all, so you can put 8 points.

In most cases, you can withdraw money from the deposit at any time. But if you withdraw money early, you will lose most of the profit. 7 points for liquidity.

This type of deposit belongs to the “put it and forget it” category. All you need to do at the end of the investment period is to come to the bank and withdraw your money. Well, or roll over the deposit. 10 points.

Pros:

• High reliability.
• Availability.
• Low taxes. You will have to pay 35% of taxable income, which is calculated according to the formula: all income minus the refinancing rate.
• Predictability of results.

Minuses:

• Low yield.

Conclusion. This type of investment is more likely not to increase your money, but to somehow compensate for inflation. In any case, if you do not want to risk at all, then this method is better than just keeping money under your pillow.

2. Mutual investment funds (PIFs).

For an ordinary person, investing in mutual funds seems not a very clear undertaking. To understand this, try explaining to your grandmother at the entrance that you are buying shares in the fund of a management company that invests money in assets.

The choice of a mutual fund should also be taken seriously, studying the statistics of different funds. After that, you need to go to the office of the company or its agent. For simplicity I will put 6 points.

The yield here depends on the type of funds and on the approach to choosing a mutual fund. The riskier the investment the fund makes, the higher the potential return is expected, but in most cases it is not high. 3 points.

Reliability also strongly depends on the type of fund. At a time when bond mutual funds are one of the most risk-free investments, investing in venture funds carries very high risks. On average, I would rate reliability at 7 points, because at least you will not be able to lose most of the deposit, as in other ways of investing.

The minimum cost of a share starts from 300-500 rubles per share, which is suitable for almost everyone. 10 points.

I think most people invest in open mutual funds, so in this paragraph we will only talk about them. You can withdraw money from open funds by selling your shares in 1-3 business days. I will put 10 points.

Still, with this method of investing, you will have to spend a little time managing your investments. Of course, the management company will do the management within the fund without your participation, but you will have to transfer money between mutual funds and decide when to sell shares and when to buy. 8 points.

Pros and cons of this investment method:

Pros:

• A large number of assets in which the fund can invest.
• Low entry threshold.
• Relatively low risk.

Minuses:

• Possibility of making a loss in case of an unsuccessful choice of a fund.
• Relatively complex investment procedure.
• An investor should be interested in the stock market.

Conclusion. With a successful selection of funds and proper management of your investments, the profit from the deposit covers inflation and brings a small income. But you need to remember that many funds bring losses to their investors.

3. PAMM accounts.

Brokerage companies have invested so much money in advertising in recent years that only the deaf have not heard about Forex and the tempting prospects of becoming a successful trader. Therefore, it is not difficult for an ordinary person to understand the principle of PAMM investing - to give money to a trader so that he can play on the stock exchange.

You can find a suitable broker on the Internet. At the moment the most popular is Alpari. So I will put 7 points for simplicity and clarity.

Some accounts can bring you more than 100% profit per year, and some drain all your money. But, when using the principle of risk diversification, the income from this type of investment is slightly higher than in mutual funds and is estimated by me at 5 points.

As returns increase, so do risks. When using the principle of diversification, you will not lose the entire amount of your investment, but you may receive a loss. For reliability, I would put 6 points.

You can start investing in PAMM accounts with $10. At the moment, this is equal to 700 - 800 rubles. The amount is small, so I put 10 points.

You can withdraw money at any time within one to two business days. Therefore, for liquidity 10 points.

Investment management takes time. If you do not use automatic tools, then you will have to log into your personal account almost every day. After all, the market situation can change very quickly and your managers can make critical mistakes. I bet 6 points.

Pros and cons of this investment method:

Pros:

• Low entry threshold.
• Opportunity to build your own investment portfolio.
• Simple investment procedure.

Minuses:

• It is possible not only to receive a loss, but also to drain the entire amount of the deposit.
• An investor should be interested in trading in the foreign exchange market.

Conclusion. This is a very common way of investing, which has gained popularity due to advertising. This way to invest money is more suitable for those people who like the foreign exchange market or who have experience in trading on the stock exchange.

4. HYIP projects.

This type of investment is often referred to as quasi-investment. In simple terms, these are pyramids that accrue profits to participants from new deposits.

It is very easy to invest in these projects. Many of them accept bank transfers and payments through the most popular payment systems. Most often, HYIPs have a legend that explains to gullible investors where the company takes money from to pay such high interest.

It is very easy to make a contribution to such a project via the Internet. But, if you are new to the Internet, it will be more difficult. For convenience, I would put 8 points.

Profit HYIP-projects promise simply cosmic. On average, long-term HYIPs offer to pay 20-30% per month. Short-term ones can promise to double the amount of the deposit in just a few days. 10 points for the promised yield, but in fact it, of course, turns out to be lower.

There is no need to talk about any reliability of deposits. The project can collapse at any moment. Every day 1-2 HYIP projects are opened and the same amount is scammed. Therefore, for reliability, I would put everything 1 point.

I think that in this paragraph and the paragraphs below, we should consider only long-term projects. The minimum amount of entry into them starts from 1,500 thousand rubles. 9 points for a low entry threshold.

In most projects, the deposit cannot be returned. It will be returned to the depositor during the entire investment period with each payment. Therefore, only 1 point.

If you have already invested in one of the HYIPs, then all you have to do is sit and hope that the project will exist and pay. You can't do anything anymore. Completely passive investment deserves 10 points.

Pros and cons of this investment method:

Pros:

• High yield.
• Convenient deposit and withdrawal of money.

Minuses:

• Very high risks.

Conclusion. Earn onHYIP-projects can only those who are "in the know." You need to be able to analyze projects and find those that can generate income. Most people who make money on HYIPs compensate for the loss when investing by attracting referrals.

5. Bucking (investing in poker players).

Almost everyone knows about such a game as poker. At the same time, many understand that successful players receive big money for winning tournaments. But how many people know that most poker players don't play big tournaments with their own money?

That is, if a strong player does not have enough money to participate in the tournament, he turns to an investor (sponsor), who receives a percentage of the prize money if he wins. The player can also have several sponsors who invest in the player and profit from winnings depending on the amount of investment.

You can buy a share from a player only by agreeing on it on specialized forums. For example, on the forum of this site: PokerStrategy.com. To purchase, you will need to personally write off the player. For convenience, I would put 4 points.

The reliability of this type of investment is highly dependent on the choice of players. In addition, when buying a share, you do not sign any contracts and the player may “not want” to give you your share for winnings. 3 points for reliability.

You can buy a share from $10. But only novice players sell so cheaply, to buy a share of a professional, you will need to invest 200-300 dollars. But it's still better to start with small investments, so I put 10 points for a low entry threshold.

There is no such thing as withdrawal of money. You pay a share, and if the player gets into the prizes, you take the profit.

After you have made a deposit, you just have to wait for a positive outcome. You can no longer influence anything. 10 points.

Pros and cons of this investment method:

Pros:

• The possibility of making big profits when a player wins a tournament.

Minuses:

• More suitable for people who understand poker.
• The deal is based only on an oral agreement with the player.
• Usually, players earn more than sponsors.

Conclusion. Rather, backing will suit people who are well versed in poker. It will be difficult for the average person to pick the "right" player.

6. Trust management in sports betting.

Most people treat sports betting like gambling. But professional marques earn a lot and consistently on bets on sporting events.

Many privateers create their own PAMM accounts, which actively attract investors. This type of investment is similar to PAMM accounts in the foreign exchange market.

In order to make a deposit, you need to register on the BetPamm.com trust management platform and select several accounts for investment. 7 points for simplicity.

If you look at the charts of profitability, you will see that the leading privateers increase the funds in their accounts by thousands of percent. Such income should bribe. But on average, the return on this type of investment is much lower and deserves 6 points.

If you use the principle of diversification and invest in several PAMM accounts, then at least you will not lose the entire investment amount due to privateer errors. For reliability, I would put 6 points.

Investing can start with very small amounts. For a low entry threshold 10 points.

You can withdraw money quickly and easily. 10 points.

After investing, you will need to monitor the selected PAMM accounts in order to transfer money between accounts in case they go to a loss or achieve maximum profitability. 6 points.

Pros and cons of this investment method:

Pros:

• Short term investment.
• Self-build portfolio.
• Low entry threshold and the ability to use a demo account.

Minuses:

• The possibility of receiving a loss or draining the entire amount.

Conclusion. This method of investment is very similar to investing in PAMM accounts in the Forex market. But it is not so famous due to the lack of advertising.

7. Startups (venture investments).

In recent years, stories of successful startups have been booming all over the place. Everyone understands how profitable it would be to buy shares of young companies, which in a few years would turn into large billion-dollar corporations.

The first way to invest in a startup is to conclude an investment agreement with the company directly. Some companies actively attract investors on their own by selling them future shares at discounted prices. Yunitskiy's SkyWay can serve as an example of such a startup.

You can also invest in a startup using crowdfunding platforms and startup exchanges. Exchanges do not inspire confidence in me, as I consider them HYIPs (read my ShareInStock review). But many reputable sources call them real companies. When you enter the exchange, you will see audited and verified companies in which you can buy shares. You just have to choose a suitable startup and buy a share in it. For simplicity 7 points.

For the purchase of shares on the exchange, the company will pay you dividends in the amount of 2% to 7% per month. In addition, an investor can sell his shares if the company develops and its shares grow in value. He can also sell shares if they lose value and he realizes that he has invested in a shell company. For profitability 6 points.

You need to understand that startups are a risky type of investment. According to statistics, 70% of them are unprofitable, and 20% of these 70% are just scammers who embezzle investors' money. But even of those companies that are in the top 30%, half of them break up in the near future due to internal problems.

One of the ways to invest in startups is through crowdfunding platforms. Unfortunately, in Russia they are not very developed and the minimum amount of investment through them is quite high. But all the companies represented on the site are subject to mandatory verification. There is also the possibility of investing in startups directly. For reliability 6 points.

The entry threshold for this type of investment is not high. 10 points.

If you decide to withdraw money or redistribute it within the share exchange by selling all or part of the purchased shares, then you will need to sell them on the exchange at a price below the market. The lower the price you set, the faster your shares will be bought. 7 points.

For the most profitable investment, you will have to devote your time. It will be necessary to track changes in the value of shares on the exchange, selling and buying them. There is no manager here, so you have to do everything yourself. 5 points.

Pros and cons of this investment method:

Pros:

• Convenient and simple investment procedure.
• Very low entry threshold.
• High potential return.

Minuses:

• High risks in passive investment.

Conclusion. If you decide to invest in startups, then it is better to use exchanges. You will pay about 5% for withdrawing money, but you will be protected from scammers.

8. Currencies and precious metals.

Surely, among your friends and acquaintances there is a person who, with a smart look, claims that money should be kept in gold (platinum, dollar, pound, yen, etc.). This approach says that a person does not understand investing, but simply uses popular “stereotypes” among the people.

For example, if you look at the dynamics of gold prices, you will see that since 2012 it has depreciated against the dollar by almost one and a half times.

If you decide to do without the services of managers and independently buy precious metals or currency in order to store money in it, then this procedure will not be difficult.

You can buy currency in bank branches, or by using the services of brokers (which will be more profitable than buying through a bank). You can also change currencies using online and offline exchange offices or payment systems.

Precious metals can also be bought from banks. And it became possible to purchase gold using the WebMoney payment system.

Also, do not forget about cryptocurrencies, for example, Bitcoin, which, according to all forecasts, will rise in price in the long term. The purchase of these assets will not be difficult, so I put 8 points.

Buying precious metals or currencies for long-term investment primarily protects you from the depreciation of the national currency. For many countries with weak currencies, this is a reasonable solution. But courses behave unpredictably, so there may not be any profitability. 2 points.

A beginner does not know which direction the course will go in the near future, so his investment is more like gambling. Even if now people prefer to keep their money in dollars, what is the guarantee that oil will not rise in price in the near future along with the ruble?

You can probably protect yourself from the depreciation of the national currency by keeping half of your money, for example, in dollars, and the other half in rubles. So when the rates fluctuate, you will not lose anything, but you will not earn anything either.

Profitability depends on luck and I would bet everything 2 points.

The entry threshold depends on the type of asset and on the method of purchase. On the exchange, 1 lot will cost at least $1,000, and through exchange offices or payment systems, you can change amounts of several dollars. So anyone can buy currency or precious metals. 10 points.

You can sell currency as quickly as you can buy it. In exchange offices and exchanges, this is done almost instantly. Gold is also a highly liquid asset. 10 points.

In general, attempts to influence profits by tracking rates and then selling assets already turns you into a trader. And I would not attribute trading to investing. Therefore, I understand investing in currencies and precious metals as “put and forget”. So 10 points.

Pros and cons of this investment method:

Pros:

• Able to protect against depreciation of the national currency.

Minuses:

Conclusion. Buying precious metals and currencies for a beginner is a very unpredictable way to invest money. You can reduce risks and increase profitability either by entrusting money to a manager, or by independently studying trading in the foreign exchange market.

9. Securities.

I think that most people from securities are familiar only with stocks. The most financially literate will probably be able to name more bonds. Only a few know how to invest money in securities.

In fact, buying securities is no more difficult than buying a currency. You also need to contact a major bank or broker. 7 points for simplicity.

When buying securities as a beginner, making a profit is a big question. And, if even a beginner can count on a small income when investing in bonds, then the stock market can bring a loss to a novice investor. 3 points for profitability.

In fact, usually low returns entail low risks, but not in this case. There are high risks in the stock market. 3 points for reliability.

You can start investing with a small amount. The entry threshold starts at about 1,000 rubles. 9 points.

Securities can be sold on the stock exchange in the same way as you bought them. This asset is considered to be quite liquid. I bet 10 points.

Again, if a person begins to manage his securities on his own, then he is already turning from an investor into a trader. Therefore, here we consider only passive investing. 10 points.

Pros and cons of this investment method:

Pros:

• Simple investment procedure and low entry threshold.

Minuses:

• For a beginner, this is a risky and low-yielding way to invest money.

Conclusion. If you have already decided to invest in securities, then it is better to contact a professional manager who will manage your funds for a small commission. Investing in the stock market on your own as a beginner is more like gambling than investing.

10. Real estate.

There is one stereotype among people: “ The most reliable investment of money is the purchase of real estate". But do not forget that real estate includes not only apartments, but also various buildings, structures, water bodies, forests, etc.

In general, there is some truth in this, because many people want to save up for an extra apartment by old age in order to rent it out and get a good pension increase. And in which case you can sell it and get a good capital.

You can invest in residential or commercial real estate, under construction or already built, suburban or located within the city. Ease of investment also depends on the choice of the type of real estate.

To invest in residential real estate, you will need to contact a realtor, look for suitable options, draw up a lot of documents and, possibly, make repairs. As for me, the procedure is quite dreary.

If you decide to buy commercial real estate, then the hassle becomes much greater. You will need to keep accounts, pay taxes, manage facilities, re-register energy supply. On average, for convenience, I would put 2 points.

As for profitability, you can receive no more than 1 percent per month from residential real estate with a long-term lease. This is 7-10% per year. The renting of residential facilities by the day turns into work and is not considered.

If you expect to sell it more expensive after a while, then it is far from a fact that prices will rise. In general, for profitability, I would bet 3 points.

Real estate, indeed, has a high reliability. Unless, of course, this is not an object under construction.

Even if real estate prices fall, you will continue to make a steady income from rent. For reliability, I put 9 points.

The entry threshold is high, even if it is a collective property purchase. The minimum investment amount starts from several hundred thousand rubles. I will put 2 points.

It often happens that in order to quickly sell real estate (especially commercial) you have to set a very low price. Sometimes objects cannot be sold for several months. I bet 3 points.

If we consider a long-term lease of residential real estate, then you will not have to spend much time on management. You will need to find tenants once and then collect money once a month. 8 points.

Pros and cons of this investment method:

Pros:

• Clear scheme of income generation.
• High reliability.
• You do not need any special knowledge and experience in investing.

Minuses:

• High entry threshold.
• Low profitability.

Conclusion. Investing in residential real estate is understandable to every way of investing money. This method is especially liked by conservative investors who do not want to take risks.

11. Investment in business.

Of course, here we will not talk about investing in creating a business from scratch, but about buying a ready-made company. Starting a business from scratch is hard work with unpredictable results. An investor is interested in an established business with streamlined processes that brings a stable income.

In order to find a company to buy, you can use newspapers or bulletin boards. But most often, the entrepreneur does not talk about the sale of his offspring, so as not to raise doubts among employees and customers.

Therefore, they prefer to contact broker companies that will sell their business. They also distribute information about the sale among friends and acquaintances.

Once you have found a suitable business, you will need to audit it to make sure that business processes are in order. This whole procedure for a beginner can turn into an insurmountable obstacle. 1 point for simplicity and clarity.

Super profitable businesses rarely sell, so you should count on average profitability. Of course, profitability strongly depends on the type of activity and the quality of management. I will put 6 points.

Many people think that entrepreneurs only sell unprofitable businesses. But actually it is not. The reason for the sale may be: an urgent need for money, disagreements between the owners, loss of interest, lack of time (especially if one entrepreneur has several types of business), etc.

The audit will help analyze the reliability, profitability and prospects of the business. Therefore, the chance of buying a loss-making asset is very small. I bet 7 points.

The entry threshold for this type of investment is relatively high. Yes, there are very small companies, but they cost far from a penny. Buying a profitable business with streamlined cost processes is similar to buying real estate.

Often people join groups to buy a business. For example, several friends and acquaintances buy a company together. But even in this case, the entry threshold remains high. I will put 2 points.

If you urgently need money, the company can be sold. If your business is unprofitable, then it will be difficult or almost impossible to sell it. A profitable business is easier to sell, but most often this procedure takes a lot of time. So 3 points.

If you manage the acquired company on your own, then turn from an investor into a businessman. Therefore, you will need to hire an executive director who will manage your business. But even in this case, you will have to control it and analyze the activities of the company.

Yes, and you will need to deal with the selection of a manager yourself. So 2 points.

Pros and cons of this investment method:

Pros:

• Reliable and profitable type of investment.
• You can choose the business that you like and understand.

Minuses:

• Complicated procedure for selecting and registering a business.
• High entry threshold.
• It will be necessary to delve into business processes and to some extent manage the company.

Conclusion. I believe that if you have enough capital, buying a ready-made business is one of the best ways to invest money. But it is desirable that you like the type of activity of your company and that you have at least minimal experience in doing business.

12. Investments in content sites.

This way of investing money is similar to investing in a business, but with a simpler purchase and management procedure. Again, you do not need to create and promote a site. You can just buy a ready-made project.

The website itself is more of a tool than an asset. The real asset is the audience that visits this project every day. The site owner makes a profit by displaying ads, affiliate programs and other sources of monetization.

To buy a site, you can use the exchange. One of the most popular exchanges in Runet is Telderi.ru. In the list of sites for sale, you can see all the information on projects: audience size, profitability, development dynamics, payback period, etc.

The transaction is protected and follows the rules of the auction, where the site goes to the buyer who offered the highest price. For simplicity, you can put 4 points.

Usually normal sites are sold at a price equal to the income from it for 12 months. That is, if the project brings 20,000 rubles a month, then the fair price for it will be 240,000 rubles.

But in most cases, on such sites, monetization works far from 100%. Thus, after “twisting” monetization, it will be possible to recoup the contribution in 6-10 months. 7 points for profitability.

If the site is made with high quality and promoted only by "white" methods, then such a contribution can be called reliable. Of course, if you want the project to bring you profit for more than one year, then you need to carry out at least minimal work on it. But, for a year or two, the project will be enough without additional investments. 8 points for reliability.

In general, some sites are sold very cheaply. You can find it for 500 rubles. But such sites should not be of interest to the investor.

You can buy as one expensive and high-quality site, as well as several medium ones. Therefore, I do not advise you to start with too small amounts. I will put it at the threshold of entry 6 points.

If the project ceases to be of interest to you or you need money, then you can always sell it on the same exchange. For this I bet 4 points.

When buying a site that will bring you passive income, you can make a profit without doing it at all for a year or two. But, over time, without administration and updates, the project will lose its audience, bringing less and less income. I will put 4 points.

Pros and cons of this investment method:

Pros:

• Convenient investment amount for everyone.
• High investment security.
• You can develop the project, increasing profits.

Minuses:

• You need to have minimal knowledge about sites and how to monetize them, or seek help from an experienced specialist.

Conclusion. Investing in content, information and other similar sites is one of the best ways to invest. This type of investment can easily be turned into a business by working on purchased sites and increasing profits.

Which method do you like the most?