The investment process and its participants

The investment process by definition is the process of placing financial assets or any other capital, the purpose of which is to obtain future profits. In other words, the investment process can be imagined as an action in the process of which investment funds or some other capital invested by an investor is working for him, and at the same time bring him a potential income. That is, investing can be considered one of the possible ways to make a profit by investing capital.

The investment process is one of the components of the modern economy. The investor is actually in the role of lender, however, the risk when investing is different from the credit risk. Credit and interest, irrespective of profit, must be returned within the agreed timeframe, and thus yield income. You can count on the return of investment and income only in the case of a profitable investment project, otherwise investments may be lost.

The investment process consists of a number of procedures that enable the investor to choose the investment project, the size of the investment, the moment of its implementation, the most investment and, finally, the control over the project implementation.

However, far from every small investor has time to choose alternative solutions, not to mention the necessary professional knowledge.

Therefore, it is no coincidence that a large number of different forms of collective investment are created to meet these needs. Perhaps the most common and promising form of collective investment are investment companies.

The investment company is a specially organized form of a financial intermediary, which is attracted from investors funds to purchase financial assets. Investors, in turn, are given certain rights with respect to both the assets they have acquired and the profits they receive.

Thus, one of the main functions of investment companies is to pool the capital of many investors who have the same investment objectives. They usually exist in the following organizational forms:

• Mutual funds (open investment companies);

• Closed-end investment funds.

The investor in this way is freed from the need for many, perhaps, insufficiently familiar procedures, for example, risk calculation, accounting and taxation - for all this, experienced managers are responsible.

The investment fund gives investors the opportunity to reduce investment risks. This is a universal way of investing its capital, since in this case it is possible to choose the optimal ratio between the riskiness of investments and the level of their profitability.

The investor of the fund formally, proportionally to the deposit, owns a share of each of the shares of the assets of the investment fund, but in reality, in fact, JSC can not participate in the management of the joint-stock company - managers who formally transferred these powers when buying shares. The real and formal owner of all shares as a legal entity is an investment fund.

The emergence of stock forms of the investment process facilitated the transfer of capital from one group to another. We can say that investment funds are huge capital mixers. Thanks to them, ordinary investors can save and accumulate capital, and at the same time avoid risks that are inevitably associated with investments.

It is obvious that the investment process, like any other, which is subordinate to the achievement of a specific goal, needs management.