What is investment? Many people often ask this question. The reason, they still doubt whether the investment is profitable or detrimental.
No wonder many people think like that, because there are many cases where people go bankrupt because of investments. But, behind that there are also many people who are successful and rich because of investment.
Take Warren Buffett, for example, who has been investing since he was 11 years old. So, it's only natural that now he has a total wealth of US $ 72.5 billion which if converted to Rp 1,061 trillion.
Well, for those of you who want to have lots of money like Warren Buffett. Come on, understand what investment is, how it works and what kind of risks and benefits you will get.
What is Investment
Investment is a term that is already familiar to the ear. Investment is an effort to invest capital or funds in the hope of getting a profit (return) in the future.
In general, investment is spending or utilizing time, energy, money for profit or benefit in the future. So investment is an activity to buy something that is expected in the future to be resold at a higher value than before.
The purpose of investing is not to make an investor get rich quick, however investment must be undertaken with patience, strong commitment and staying calm when the market fluctuates. But that doesn't mean you can't invest in the short term. There are many short-term investments that are equally as profitable as long-term investments.
Short Term Investment and Long Term Investment
- Short Term Investment
- Long term investment
Types of Investment
- Deposit
Time deposits or investment is one type of investment that is in great demand because the method is very easy and uncomplicated. If you save a certain amount and time, you will earn interest. The advantage of deposits is that the rate of return of money is fixed, the promised interest is even more certain. Unfortunately you cannot withdraw money before reaching the agreed time period.
- Share
In addition to deposits, stocks are also one of the most popular types of investments. Technically speaking, you will buy shares on the stock exchange. After that you will get a percentage of ownership rights of a company.
The greater the percentage of shares owned, the stronger your power in the company. The advantages of investing in stocks consist of two forms, namely profits from capital gains and dividends. Capital gain gains can be monitored every minute, hour, and day. At any time the price of a company's share certificate can change at any time. An example of profit comes from dividends, namely, the amount of profit earned is based on the distribution of company profits. Profit sharing is adjusted to the percentage of your share ownership.
- Cryptocurrency
Cryptocurrencies or types of investments in digital currencies are indeed quite popular. How not, bitcoin currency in recent years has increased very rapidly. These fantastic numbers make digital money investments become much in demand. Digital money does not have a physical form, but you can look for it in rupiah or dollars. While tempting, it is not easy for someone to mine bitcoins. You should also pay attention to the growing cryptocurrency market sentiment because the level of currency fluctuation is very volatile against real currencies.
- Bond
Bonds are a type of investment that is almost similar to stocks. The difference is that the results obtained are more dynamic, the amount of money you get tends to be more certain. For example, you buy debt securities for IDR 5,000,000 for a period of 10 years with 10% interest. However, before that time period is over, you can take the money with the adjusted interest amount. You can buy bonds issued by the government. The reason is because the government has a smaller default risk compared to corporate bonds.
- Gold
Gold is one of the most popular real or physical investments. Gold is an attractive option because it has a fairly low risk. Gold has a stable value and always rises every year. If you want to invest in gold, you should choose gold bars. The price of gold bars is different from gold jewelry. The value and price of this gold bar is pure gold without any mixture like gold jewelry.
However, if you invest in gold then you have to prepare a special place. Gold investment is one of the physical investments that the risk of loss is quite large. Now there are many gold investment applications in Indonesia, to make it safer to use gold storage applications.
- Property
Property investment is one kind of physical investment other than gold. This investment has a tangible physical object. Property investment is very profitable because the price continues to increase every year. There are many ways to invest in property, the simplest of which is to buy land and then build property on it. After that you can sell it at a higher price. The risk of property investment is in consideration of building damage. Even though the risk is low, property is an asset that can be damaged in a disaster. You have to take care of it to keep the resale value high.
- Mutual Fund
The next type of investment is mutual funds. Mutual funds are investments where funds are collected from several investors into one and then invested in various types of capital markets. Mutual funds are divided into 5 types, namely money market mutual funds, equity mutual funds, fixed income mutual funds, mixed mutual funds and index mutual funds.
Investment benefits
1. Financial freedom
One of the investment goals is financial freedom, where a person is considered to have been able to get passive income to meet the needs of life in the long term.
For those who work, passive income is income outside of the salary received every month from where they work. In other words, financial freedom can be obtained when the needs of life can be met even though someone decides to no longer work.
2. Protect assets from inflation
The next goal of investment is to protect assets from inflation. Inflation that occurs continuously every year can make the value of assets decrease.
With investment, assets also develop to produce added value so that they can offset the scourge of inflation.
3. Increase wealth
Indeed, the benefits and purpose of investment is to increase the number of assets or wealth owned. For someone who works, the return on investment is certainly an additional income.
4. Emergency needs
Many people choose investment because it is a safe way when experiencing an emergency. This is because in the future, sometimes there will be costs that must be incurred in large amounts, while the monthly income is felt to be insufficient.
Some emergency conditions include investment costs such as the cost of renovation or buying a house, education costs, pilgrimage fees, to hospital costs if sick in the future (meaning investment).
5. Fight inflation
Inflation occurs every year causing the value of the currency to decrease. Without investment, the value of the money you have will be eroded every year. Therefore, it is important to look for investments with returns that are higher than the percentage of inflation.
6. Add source of income
By investing, you indirectly get another source of income. Therefore it is advisable to set aside a portion of your salary every month to be invested, so that every month your salary also works!
7. Reach financial goals faster
Suppose you need funds of $100 million for house down payments. If you only save USD 1 million/month, then it will take you more than 8 years. However, if you invest with an average return of 12% per year, then you can achieve that goal in less than 6 years.
