The concepts of “Foreign Investor” and “Foreign Investment” will be clarified

Foreign investors in Russia

Editorial

Promdevelop editorial team

The issue of attracting foreign investors to Russia continues to be a pressing topic of research among businessmen, government officials, and representatives of the scientific intelligentsia.

According to the laws of macroeconomics, investments from foreign investors are the most important component of economic growth. Some problems of attracting investors to Russia are proposed for consideration in the article.

Investments in Russia 2021

Despite the fact that Russia does not have the most favorable investment climate, the amount of investment in our country is growing year by year. This is facilitated by two main factors - the number of financially literate people is growing and the increasing advertising of various types of investments. And if the first factor is a positive thing, then the second cannot be said so unequivocally. Advertisements for investments, from bank deposits to buying franchises and opening a new business, await the modern person almost everywhere - on TV, in the press, on the Internet and on social networking pages.

A certain number of gullible Russians fall for such annoying advertising with a fairly predictable result - they lose their savings. To prevent this from happening, you need to know what kinds of investments there are, and how to choose your own instrument that would fully meet the interests of the investor. Money does not tolerate being taken lightly; this is worth remembering.

“Any investment must make sense both today and tomorrow.” Robert Kiyosaki

Investment classification

Typically, investments are classified according to several criteria at once, that is, characteristics. It is needed mainly for clarity and ease of systematization of a significant amount of information with such a large number of existing types of financial investments. I would like to highlight the classification of investments as simply as possible, citing both the types and characteristics of certain investments. A novice investor can use this information not only as basic knowledge, but also as a main component to calculate the return on investment and its feasibility.

By type of ownership

This is a characteristic that demonstrates the source of financial investments. There are:

Private - these funds are invested by individuals as well as legal entities;
State - a financial investment made by central or local authorities using budget funds;
Mixed - as the name implies, such investments are made jointly by individuals, as well as non-governmental and government bodies;
Foreign investments are investments made by foreign states and their residents, which can be either legal entities or individuals;
Joint - financing that comes from both domestic and foreign entities.

By objects

This type of classification indicates which object will be financed. There are 4 types of such investments:

Real investments are investments in fixed and working capital, tangible and intangible assets.
Financial investments are investments primarily in financial instruments, such as shares, foreign currency, and precious metals.
Speculative - investing in investment assets for the purpose of their subsequent resale.
Venture capital is a financial investment in newly created companies that have great potential for future development and, accordingly, profit.

According to intended purpose

An investment can also be characterized by its goals:

Direct - investments in materials for business development in order to further take an active part in the company’s business activities.
Portfolio investments - financial. investing in the securities of an enterprise, which allows you to receive income from the company’s activities and influence its future policy.
Real investment is investing money in material production.
Non-financial - contributions in the form of patents, discoveries, trademarks, which helps to increase operational efficiency.
Intellectual - investing in intellectual forms of activity - developing know-how and new technologies.

By investment period

According to the terms of investment, it is customary to divide them into:

Short-term - such an investment is invested for up to 1 year;
Medium-term - investment ranges from 1 year to 5 years;
Long-term - investments are made for a period of more than 5 years.

According to the degree of risk

Depending on the degree of investment risk, it is customary to distinguish 4 types of investments:

Risk-free investments - this option is different in that there is no real risk of losing funds, that is, there is a one hundred percent guarantee of profit, which is extremely rare.
Low-risk investments - in these investments the risk of losing funds is significantly less than the market average.
Medium-risk investments - the level of risk is close to the market average.
A high-risk investment—the level of risk is many times greater than the market average. A feature of such high risk is the equally high return on investment.

Warren Buffett

Buffett is the most famous investor and one of the richest people in the world. He remains true to the investment philosophy of the mid-20th century (value investing). Looks at companies fundamentally and invests in stocks that are undervalued by the market.

Buffett invests where he knows well and believes that it is impossible to predict market behavior. He perceives the purchase of shares not as a purchase of securities, but as a purchase of a share in a business.

Warren also likes to save money. Every morning he has breakfast at McDonald's and lives in a house that he purchased back in 1957. Since 2011, Buffett has been included in the list of the most influential people on the planet according to Forbes.

You don't have to be a rocket scientist. Investing is not an area where a person with an IQ of 160 will do better than a person with an IQ of 130.

Foreign investment in Russia

Foreign investment for a state like Russia is an important component of the national economy. That is why Russia at the legislative level adopted the Law “On Foreign Investments”, which protects the rights of foreign investors. At the same time, financial investment from abroad has a large number of advantages:

Russia attracts capital and new technologies;
Modernization of production increases the profitability of the enterprise and GDP;
Improve the competitiveness of domestic enterprises on the world market and increase the export of Russian goods;
Improve the organization of Russian production and increase the productivity of enterprises.

The main industries that are most attractive to foreign investors are IT, banking sector, gas and oil industry.

Western experts confidently say that Russia has a promising market and investing in it is very profitable. These words are confirmed by world-famous companies, including Ikea, Pfizer, Leroy Merlin, Mars Inc and others, for which Russia is a country in which they are not afraid to build new plants and factories. According to analysts, the Russian economic recession has ended and in 2017 the domestic economy began to grow again. This indicates a positive atmosphere for foreign investors.

Foreign investments in the domestic economy make it possible to attract capital and high technologies, and therefore improve the competitiveness of Russian goods on the world market.

Russian reality

Investment activity on the territory of Russia must be carried out in accordance with the norms of the federal law “On investment activity in the Russian Federation, carried out in the form of capital investments.” Among other provisions, this regulatory document defines the current investment protection mechanism.

At the same time, international agreements concluded by Russia are harmoniously implemented into our legal system. In other words, the provisions of these agreements in no way contradict the above-mentioned federal law. On the contrary, they are designed to complement it.

Thus, on the territory of the Russian Federation, a two-level protection of foreign capital and investments has actually been implemented. On the one hand, they are protected by the norms of national investment legislation. On the other hand, signed international agreements.

Popular types of investment in Russia

Many Russians dream about passive income, because how tempting it is to receive an impressive amount every month without making any effort. This is where investments help, which today are available even to a person with an average income. But if so, why are there so few investors in a country like Russia? The answer is obvious - investments always carry the risk of losing their funds and the higher the possible earnings, the higher the risk of losing part or even the entire investment.

And our mentality is such that a person is not always ready to risk his money; he prefers earning money without investments. The term “financial pyramid” is well known to our compatriots and at the moment they are not too ready for financial risk. Nevertheless, the question of where Russians can invest their money profitably today remains relevant. It's time to cover in more detail the most popular areas of investment in Russia.

Investments in cryptocurrency

If you have a desire to invest in cryptocurrencies, but do not know where to buy Bitcoin for rubles, then we recommend that you pay attention to the Matbi online exchanger. This is a convenient platform not only for buying and selling, but also for reliable and secure storage of digital assets. After registering on the site, the user has access to 4 crypto wallets for storing Bitcoin, Litecoin, Dash and Zcash. Now all that remains is to top up your personal account balance with rubles and start exchanging rubles for one of the cryptocurrencies. All processes are discussed in detail in this video.

Bank deposits

The simplest and most popular way of investing Russians’ money over recent years is a bank deposit. Its advantages are a low entry threshold, because the first deposit can be made with only 1,000 rubles in hand, as well as high guarantees of maintaining the deposit. In addition, the simple system of bank-client relationships captivates many. Once you deposit money in a banking structure for a certain period of time, you can forget about managing the deposit, all that remains is to receive interest on time, the amount of which is known in advance. On the other hand, a bank deposit is more likely to preserve savings from inflation than a full-fledged investment, since it will not bring much money - the income from the deposit is only slightly higher than the inflation rate.

Real estate

The second most popular type of investment for Russians. Its popularity is due to the low risk of capital loss, because the property cannot depreciate in value. If its price falls during a crisis, then the rest of the time it grows steadily. In addition, owning your own real estate allows you to earn money not only from the increase in its value, but also from renting it out. However, this investment also has disadvantages. Firstly, not everyone can afford to buy an apartment or a house in order to earn money from it. First you will have to earn a million, or even more than one, in order to invest in real estate. In addition, it is too low-liquidity asset. If you urgently need money, you won’t be able to sell the property quickly, and you need to be prepared that it can be sold at a price much lower than the market price.

Stock market

The stock market is one of the most profitable ways of investing, which involves buying stocks, bonds and other securities. At the same time, the investor invests his money in a really existing business, because a share is nothing more than a piece of an enterprise. And if the business works, then the shares bring profit to its owner, both in the form of dividends and by adding value.

You don’t need a lot of money to buy shares; in addition, this type of investment allows you to diversify your stock portfolio, which makes it possible to reduce risks. However, you have to pay for high returns with unnecessarily high risks, since the share price can have very wide fluctuations. And to trade them profitably and, accordingly, to make money, you need to acquire special knowledge, which not everyone likes.

Forex market

Investments in the foreign exchange market are quite popular all over the world. Russia also has its own supporters of this type of investment. For some of them, Forex trading is a permanent remote job that brings good profits, much higher than other types of investments. For professional traders, profits can be 100-500% per month and this is not the limit. However, only a few achieve such results even with very good preparation. Without the appropriate knowledge, you can not only fail to make a profit, but also lose your money. If you don’t have the time or special knowledge to trade Forex, but you have a desire to invest in the foreign exchange market, then you should take a closer look at investing in PAMM accounts. These are special accounts managed by professional traders. For such services they take a portion of the profits. Thus, you can slightly reduce the risks, although you will have to sacrifice profitability.

Mutual funds

Mutual funds in the West are a very popular investment instrument. But in our country there are much fewer investors in mutual funds. The shareholder’s income largely depends on the professionalism of the fund manager; in addition, there are risks of loss of income due to the wrong choice of mutual fund. On the other hand, investors are attracted by higher profitability than a bank deposit with sufficiently high security of the investment and there is no need to independently understand the intricacies of working in the stock market.

Collectibles

Many Russians still believe that investing money in collectibles, such as paintings, antiques, etc. can bring good profits. This statement is only partially true for long-term investing. In addition, non-professionals have a very high chance of falling into a fake. All this makes financial investment in collectibles a very dubious proposition.

Not only the potential profit, but also the risk depends on the choice of investment type, and therefore this issue must be approached more than responsibly.

Foreign investments

Many people believe that foreign investment is only available to very rich people. In fact, you can open an investment account in a foreign company even with a small amount. At the same time, we are not talking about shady foreign offices, but about large companies that are controlled by state regulators.

Another myth is that foreign investment is prohibited for Russians. Indeed, a number of laws have recently appeared requiring foreign account holders to report to the tax authorities, but there is no talk of a ban. There are investment methods that allow you to legally reduce the level of communication with the tax authorities and control over your accounts.

It is also not necessary to speak a foreign language well. Some foreign companies have already mastered the Russian language and provide the opportunity to communicate in their native language.

Advantages of foreign investment:

large selection of financial instruments;
more opportunities for portfolio diversification across countries, currencies and asset classes;
diversification of funds by country (storing money in the accounts of foreign companies, and not just in Russia);
more favorable conditions for financial instruments and investment conditions;
direct access to exchanges in other countries without unnecessary intermediaries;
more reliable and higher capital protection (much more than 1.4 million rubles);
the opportunity to receive passive income (foreign funds pay dividends, unlike mutual funds).

There are currently three ways to invest abroad:

through a foreign bank
through a foreign broker
through a foreign insurance company

Foreign bank

If we talk about investing through foreign banks, then first of all this concerns clients of Private Banking - a service for wealthy clients within which the bank offers banking, investment and consulting services. Investor capital requirements are usually from 100 thousand to 1 million dollars/euro or more. And the larger, more famous and more reliable the bank, the larger the amount required. On the one hand, the bank offers such clients some unique services, advantageous offers, provides a personal manager or financial advisor, and so on. But the investor has to pay a lot for this comfort.

Typically, banks already have ready-made investment proposals - portfolios, their own funds, structured products. Therefore, they primarily offer clients their own products, which may not be the most profitable and optimal in terms of commissions, costs and composition. In addition, large banks are financial holding companies, which, in addition to the bank itself, also include a management company, a broker, and an insurance company, so the bank will strive to sell the client other financial products, such as life insurance.

By the way, last year large Swiss banks introduced commissions for Russians who have less than $5 million in their accounts in the amount of 1,000 Swiss francs per month. Thus, they try to refuse to work with “small” clients.

Opening an account in a foreign bank carries with it the obligation to notify the tax authorities about the opening of such an account and annually report on the flow of funds in the account. In addition, the banks themselves may ask you to document the legal origin of your funds, as they do not want to be involved in money laundering mechanisms. You will also have to file your own return and pay income tax.

As for insurance of bank accounts, the amount of insurance depends on the country: in the European Union 100 thousand euros, in the UK 75,000 pounds, in Switzerland 100 thousand francs, in the USA 250 thousand dollars.

Foreign broker

Foreign brokers can be divided into two categories:

foreign subsidiaries of Russian brokers
directly foreign brokers

Daughters of Russian brokers

Most foreign subsidiaries of Russian brokers are registered in Cyprus. This carries additional risks, since Cyprus is not the most reliable jurisdiction from an economic point of view, has low credit ratings, and in 2013 there was a serious financial crisis in Cyprus.

Another disadvantage of Cypriot brokers is that they work through a sub-broker, that is, they do not have direct access to foreign exchanges, so they buy securities through other brokers (American or European). The insurance amount for a brokerage account is up to 20,000 euros.

The advantages include the fact that communication with the broker will take place in Russian, as well as lower commissions compared to other foreign brokers. To open an account you will need an amount from $200 to $10,000.

Investment management

In order for investments to bring profit, it is not enough to invest money. They need to be managed correctly. Thanks to a properly constructed strategy, you can significantly increase profits while reducing the investment amount. Management itself can be reduced to three main stages: investment assessment, implementation of the developed strategy, monitoring or supervision of invested funds. Let's look at these stages in more detail.

Investment evaluation

At the first stage, the investor collects all available data about the investment instrument, as well as the accompanying market. At this stage, it is already possible to determine the duration and profitability of the investment. Market analysis is one of the most important and critical stages in financial investments.

Implementation of the strategy

After the investor has decided on the direction of the investment, it is time to carry out his plans. At this stage, it is important to act according to the planned plan and chosen strategy. If it is developed correctly, profits will follow.

Monitoring

Even the best strategy can fail. This is why it is important to constantly monitor your investments and change your strategy if necessary. This is especially true when investing in the foreign exchange and stock markets. Thus, you can sell assets at a profit and get the maximum profit, or get rid of the investment in time to avoid losses.

Advice for a novice investor

Getting started is never easy, and being a novice investor without experience and a clear plan is even more so. Where to invest your money, what investment projects to choose to increase your funds? These are just a few of the questions that a new investor asks himself. The path to the stars, and in our case, to profit, in any case, will be through thorns.

But you can’t do without it, because whoever doesn’t take risks doesn’t win. To help beginners, I want to share my own experience and give some tips that can help avoid the most common mistakes.

Make a plan and follow it

A competent investor must have a clear plan of action - how much he is willing to spend on an investment, how much he would like to receive and in what time frame. It is this plan that is the basis of future profits, be it investments in startups or a bank deposit. Although life is life, and the plan may change, it will be the “framework” of your actions.

Explore your chosen niche

Knowledge is power, and investing is no exception. Without knowledge, you should not invest in stocks or currencies, since in this case losses will follow immediately. Investments do not tolerate hasty decisions! To invest in an investment instrument, you need to carefully study it, assess the risks and opportunities, and then decide on the advisability of such an investment. If you are too lazy to do this, then it is better to look for another source of additional income, for example, sites for making money on the Internet.

Manage risks

Risk management is an important component in investment management. If an investment instrument becomes less profitable, you need to find out why this happened. This is what will help avoid losses in the future. Another important component of risk reduction is investment diversification. This will allow you to compensate for decreased profits on some instruments by increasing profits on others.

Turn off your emotions

Emotions and profit are incompatible. A cool head when drawing up a plan, analyzing an investment instrument and managing risk is an important part of success. With experience, financial intuition will appear, but for this this very experience needs to be gained, and this will take time.

The main task of investing is to save money and only then make a profit. That is why it is better for beginners to choose investments with low income, but also with low risk.

Additional income from investments is not a myth at all, and many people around the world have become convinced of this, and Russia is no exception. Money must work and bring in money, otherwise it simply depreciates under the influence of inflation. On the other hand, investment and risk are, in many ways, synonymous words, and you need to be prepared for this. Everyone chooses for themselves, but, as history shows, those Russians who choose this investment path are more likely to be lucky in the form of gaining financial independence.

Author Ganesa K.

A professional investor with 5 years of experience working with various financial instruments, runs his own blog and advises investors. Own effective methods and information support for investments.

The essence of the phenomenon

Investing in each specific case involves certain risks. They may be higher or lower, but there are no completely risk-free investments.

Developing countries with economies in transition and unstable political situations are traditionally considered the most risky for investors. At the same time, investment projects in Western Europe and North America have much lower risks, but also promise much lower returns.

The investor's goal is to obtain maximum profit on invested capital. The investment protection mechanism allows you to invest money even in developing countries. It provides a guarantee of the rights of investors who do not have fears that their money may be nationalized free of charge without paying compensation.