Anastasiya Besedina, Alina Bereznova

Scientific supervisor: E.L. Burdakova

Donetsk National University of Economics and Trade

named after Mikhail Tugan-Baranovsky

FINANCE INVESTMENT

Finance Investment can refer to both financial investment or investment on finance and investment on particular causes such as infrastructure and various technologies deemed necessary by the developing world.

The term "investment" is closely related to the terms finance and economics and essentially refers to "saving" or "deferred consumption" which is made possible by purchasing an asset or making a deposit in a bank in the hope that it yields future returns.

While economics refers to investment as a flow concept of goods produced for future production, thus essentially a real investment in machines, financial investment is defined as investing money in financial assets such as bonds, equities and shares in the money and capital markets which may be used to buy a real asset in the future. Trades in contingent claims and derivative securities although do not yield any future flow of returns are often treated as investments. Financial investments are made through banks, intermediaries, stock brokers in case of investing in company stocks, mutual funds, pension funds and insurance companies. At the personal finance level, the terms "saving" and "investment" are used interchangeably as persons can use their savings by investing in the capital markets in the form of shares and equities. This also leads to an "investment risk" when the investment is realized. On me contrary, idle cash in the form of savings can only devalue in the event of inflation.

On the international front, Brazil recorded high returns of pension funds in the second half of the 1990's and the funds generated can be directed to the developing sectors with proper institutional and regulatory arrangements put in place by the government due to the shallow capital market in the country. This is needed even in the economy exhibiting considerable macroeconomic and political stability.

Taking investment decisions can be tough on the part of an entrepreneur as the Net Present Value of the investment coupled with the valuation of the tangible assets (building, machinery) and the intangible ones such as patents and goodwill of the company has to be calculated before coming to an investment decision. This is an important element in "capital budgeting" techniques.

Renowned investment management companies in the Indian context can be Cholamandalam DBS Financial Services Group and Peerless Finance and Investment Company whereas those in the global arena would be Barclays Investors, Merrill Lynch and JP Morgan.

According to Budget announcement in India for the year 2007-08, Mutual Fund companies have been allowed to launch infrastructure funds and PAN (Permanent Account Number) has been made mandatory for all security transactions. A 25% dividend distribution tax has been mandated for all mutual funds and liquid mutual funds traded in domestic stock exchanges.

Financial investments can be a risky business as stock markets are known to be the most volatile in the world. The watchdog of the American stock market economy, the Securities and Exchange Commission (SEC) is favoring the move towards an integrated stock market system called the National Market System or NMS view of the rapid rise and fall of the Dow Jones index. For the first time since the steep fall in February, the Dow Jones is experiencing consistent closing above 12000 points. Other important stock indices of the world can be stated as Standard and Poor 500 (S&P 500), the Nikkei (for the Japanese stock markets) and the NASDAQ (National Association of Securities Dealers Automated Quotations System), an American electronic stock market. In the Indian stock market regulated by the SEBI (Securities and Exchange Board of India) measures of the Sensex and Nifty are used to examine the fluctuating nature of the stock markets.

With the Chinese Stock Markets showing sustained volatility experiencing a steep fall by over 8% at the end of February only to rise again, the thoughts of a world wide recession are looming large with a possible shakeout of the US subprime mortgage market. It should be noted in this context, that the US economy faced a major recession in 2001 and symptoms of another one in the present context have been kept at bay in the present situation.

It is common knowledge now that Foreign Direct Investment (FDI) can be instrumental on lifting poor countries out of the low-level equilibrium trap by financing essential sectors such as infrastructure and upgradation of the techniques of production. This can be especially fruitful in cases of the developing countries of Asia, Africa and Latin America. Capital investments in green technologies in this world of rapid climatic changes can also be a viable option for potential foreign investors. Also, investment in Assistive Technologies (AT) for helping people with disabilities is now widely been encouraged in the USA.