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Importance of investment in the financial Markets

Investment was and still the first and most important source for building wealth and enriching individuals. It is still one of the most critical factors affecting the economies of countries. The importance of investment comes in the first place from the countries that invest in national projects and have large numbers of investors on their lands (whether they are local or foreign investors) and will achieve large incomes.

But what interests you as an individual is how to build personal wealth through investment, whether locally on the homeland or abroad, in one of the countries that attract investments.

In what follows, we will provide you with a detailed guide through which you learn about the definition of investment, its importance of investment, work mechanisms, and investment criteria that can be adopted and relied upon to start a successful investment journey.

Importance of investment – Definition

Economic writers and experts have relied on many definitions that differ in their context but ultimately indicate one meaning. Many of these definitions are directed to students of economic studies. They are complex and challenging to understand for non-specialists, so we will not try to simplify them too so that they are easy to understand.

Simply we can define investment. It means spending a certain amount of money in a business, commercial, production, or service project to obtain future financial flows that compensate for the amount of money spent and help build wealth.

Investment is of great importance for countries and individuals at all levels, not just the economic status. Here is the explanation: –

The importance of investment at the country level

  • When the state invests in national projects, it produces and reduces import rates, contributing to the development of the national product.
  • When the state invests, it employs youth and raises unemployment rates, which improves the social status of individuals.
  • When the state invests, it appreciates the value of its local currency against foreign currencies, which helps to cope with inflation.
  • When the state invests in national projects, it diversifies its economic structure, increases its resources, and strengthens its economy.
  • When foreign or local individuals invest in small, medium, or large projects, the state gains substantial material benefits through the taxes that are collected annually from those projects, in addition to unemployment rates that decrease and rates of economic indicators that rise.

The importance of investment at the level of individuals

  • When individuals invest in private projects, whether the capital is one thousand or 100 thousand or a million or a billion or more or less, they develop from their money and increase to multiply and grow to many times over time.
  • When individuals invest, they turn from subordinates who do not make their practical decisions out of themselves to free people who decide what to do.
  • The investment guarantees greater returns from the daily job, “excluding unique jobs,” ensuring a decent life for the investors.
  • Some types of investment do not require any experience or skill from you, you only need money, and an example of that is an investment in stocks.
  • Through successful investment, you will get a lot of money that can be relied upon in achieving money-related goals, such as buying a new home or luxury car.
  • When individuals invest, their circle of acquaintances expands, and they can get to know various business owners and companies that serve their practical interests.
  • When people invest in their own countries, they serve their country by paying taxes and employing youth.
  • Engaging in investment opens new horizons for success, such as getting to know innovators who can do something that might succeed or the emergence of an opportunity that can be exploited.

Investment risks

  • Some markets suffer from instability, and here we are talking about medium and large projects such as factories and production lines.
  • Large, medium, and small investments suffer a lot from inflation and high prices. If we talk about a large factory, it will be affected by inflation and high prices and when we talk about a small project such as a clothing store.
  • Some markets are desirable for investments, so if you invest your money in them, this means that you are going to face old competitors, and you will meet new competitors as well.
  • In the different markets, there are big moving investors who control the markets and prices.
  • Lack of experience is one of the most significant sources of risk to investors. Markets take many changes, and investor experience has a big factor in dealing with these variables.

How to overcome investment risks

If we consider that the risks facing investors are expected problems, then for every situation, there is a solution or method that can be overcome those risks or anticipated issues. Some of these solutions and strategies are presented below.

  • The investor must have sufficient capital to cover the expenses of his project for several months.
  • Monitor the economic and political conditions in the country in which you intend to invest for some time.
  • Carefully study the market to identify risks and opportunities related to this market.
  • Full knowledge of investment laws in the country in which you intend to invest.
  • When comparing markets, you should choose markets that are stable and booming without being disruptive.
  • Make sure to study and monitor competitors constantly and know the needs of customers and the market to have an advantage that gives you the edge.
  • If you are a novice investor, be sure to consult with experts and learn to gain experiences that enable you to make the right decisions.

Where to invest your money

The investment should be related to the place that achieves the desired goals, and not to the location of residence. If your place of residence or your country, in general, can achieve your investment goals, this will be wonderful.

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