How investments pay off

Investments serve the use of capital to achieve a certain success or purpose. The focus is on the financing funds procured for the development of a specific project or company. The goal is the generation of a certain profit. In business administration, the focus is on entrepreneurial investment decisions, while in economics the focus is more on investments guided by several individual parameters. For the former, tangible investments, intangible investments, start-up investments and replacement investments may be mentioned. In business, the term is used to describe the use of financial resources to raise capital in kind on a long-term basis. Gross investment, net investment, stock investment and direct investment should, therefore, be mentioned in this context.

Investment can lead to a higher quantity and quality of production of goods; this improvement in production opportunities caused by net investment is also referred to as the capacity effect. There is also the income effect, which examines the effect of investment on demand. As a result, higher spending on plant expansion or new processes can lead to growing demand. In addition, there is a whole range of key figures that can be used to make certain statements about an investment situation. The ratio of fixed assets to the sum of a company’s balance sheets is referred to as the asset intensity. The lower the investment intensity (also called the investment ratio), the better a company can adapt to cyclical fluctuations. Because this economic key figure makes statements about the costs incurred and the inflexibility of a company. The capital tied up in inventories is illustrated by the ratio of inventories to total assets (inventory intensity). Since prices can expire quickly, an excessively high inventory ratio represents a certain risk. Therefore, decisions about investment are very difficult to make and many parameters such as capital investment, profitability and useful life have to be considered.

Secure and profitable investments 

Saving has many advantages, which is why more and more people are investing in the long term. However, it is not so easy to implement and some advice should be followed. So it is quite appropriate to pay off money yourself, not to accumulate new debts and to set realistic savings targets. In the case of Germans, the figure is about 10 per cent, which is covered by the annual income. This always raises the question of what type of equipment to invest in. You can choose from savings books, fixed-term deposit accounts, equities and funds. While the latter two, however, harbour a potential risk. So one should be clear whether safety or a high profit should be in the foreground. And then it also depends on how much capital you can divert from your income and what goal you are pursuing with it. In order to assess these factors in the best possible way, risk, profitability and liquidity are required. However, from the outset, one should sort out dubious providers, which in most cases promise a maximum exploitation of all three investment factors. However, this is impossible because a high return and liquidity are always associated with a higher risk and therefore only two of these influencing factors can be used. The savings book scores with the lowest risk, but it is no longer recommended because it only offers interest rates below 0.1 per cent and promises very little flexibility. In addition, the current inflation rate may even cause the invested capital to lose money. A better and more flexible option, on the other hand, is the call money account, which does not promise a fixed term and a higher interest rate than the savings book. An account with a fixed term would be the time deposit account, which fixes the money during the term (between one month and ten years), but which can achieve even higher interest rates. The interest rate rises with increasing maturity. Other low-income investments include foreign currency accounts, children’s accounts, home savings contracts and endowment life insurance policies.

Real estate

Investments in this very profitable investment have so far been associated with very high seed capital. Investments in buildings, construction projects or real estate funds are possible. These have quite many advantages, so large security as well as high-interest income can be expected. A fairly new form of real estate investment is crowd investment, where you can expect an interest rate of approx. Six per cent after a certain period (several months to a few years) with an amount of 500 to 10,000 euros from certain investors (such as Bergfürst). In this special form of crowdfunding, private individuals invest relatively small amounts in a particular project or business, and there is a fairly high chance of high returns. However, it is very important to conduct extensive research on this type of capital management. Because by abolishing state deposit insurance it would be possible to lose the money completely. It must also be taken into account that paid-in capital is not available during the term and cannot influence business decisions. However, it is possible to participate in interesting projects such as construction or energy projects. The first step is to register with a crowd investing platform and open a customer account. In order to select the appropriate platform, care should be taken to ensure that the company in question has already been doing business for several years and that its registered office is in Germany. Then you should agree on a project type, determine the amount of the investment and finally keep an eye on the investment project to finally get a safe and adequate return.

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