There are many investment classifications. We will describe one of the most common ones.
According to the investment period, investments are divided into short-term, medium-term and long-term:
- Short-term – investment for a period of up to 1 year.
- Medium-term – for a period of 1 to 5 years.
- Long-term – for a period of more than 5 years.
In addition, there are classifications by the degree of risk, liquidity of assets, period of profit receipt and other parameters.
If you begin to delve into the topic, you will come across concepts from other classifications. For example, the concepts of venture, speculative and portfolio investments.
Venture investments are investments in young companies (startups) for a long period. These are risky investments, but they can bring big profits. For example, the SoftBank fund invested in Alibaba in 2000. Over 14 years, the fund’s share has grown from $20 million to $74 billion.
Speculative investments are investments aimed at obtaining maximum income in a short period of time. They involve buying an asset for the purpose of resale. An investor can buy a share and sell it in two hours when it rises in price by 3%. Portfolio investments are investments in several types of assets at once. This is how investors diversify risks. If one asset in the portfolio becomes cheaper, others may become more expensive and bring profit. You can read more about this in the article on diversification.