You can often hear about direct investment on the Internet and on TV. What is this term? In this article you will learn what direct investment is in simple words. With examples. Plus, we’ll find out where it’s profitable to invest directly today and where it’s definitely not worth investing.
From this article you will learn:
- What is direct investment
- Types of direct investment
- Direct and portfolio investments
- Misclassification of private equity
- Advantages and disadvantages of direct investment
- Instead of conclusions
What is direct investment
So, you probably already know what investments are. In short, investment is investing money in something for the purpose of obtaining profit. This benefit can be very different: from money to such things as health or just a good mood.
For example, buying ice cream for many will be an investment in a good mood. And investing in promising projects can bring good income. This is all clear. What is direct investment?
Direct investment is investing in a project or company in order to gain control of this company.
That is, direct investment is when we invest money (or something else) in order to gain control over some project. In essence, this is an investment for the sake of power.
As a rule, if we control a project ourselves, we ourselves will be able to direct it in the right direction and get the maximum benefit from it. This is why direct investments are made. Although, there are possible options here.
I would especially like to note that this does not necessarily mean investing money. We can invest in any thing. For example, computers, transport or real estate. Or something completely different.
Examples
The most common option for direct investment: we can buy a controlling stake in a company. Then we can control it. By making effective decisions regarding this company, we will help it develop. This means that the company will make a profit. That is, direct investment will bring in more money.
Last year, direct investments in Russian companies exceeded $10 billion.
Another example Let's say you and your friends decided to open a non-profit club of aircraft modellers. We agreed so. From them - details. You have some kind of room, tables and chairs. It is clear that the room is a much more significant contribution than the details. Therefore, the management of the club will be entrusted to you. It turns out that this is also direct investment. But not for the money. And, just for the sake of a good mood. Well, and for the sake of control over the aircraft model club.
