Financial investment and economic investment are two important types of investment behaviors. Both aim to obtain future returns, but there are some differences between them in terms of investment objectives, risks, returns and other aspects. This article will analyze their connotations, characteristics, pros and cons, applicability and other dimensions, and summarize the main differences between financial investment and economic investment.
The definition and characteristics of financial investment and economic investment
Financial investment refers to the purchase of financial assets or securities, such as stocks, funds, futures, options, etc., to obtain income such as dividends and capital gains. Its main feature is to use funds to directly or indirectly purchase financial products. Economic investment refers to investing funds in physical assets that can produce products or provide services to obtain returns. Its main forms include the establishment of factories, purchase of equipment, infrastructure construction, technological transformation, etc.
The investment objectives are different
The financial investment aims to obtain financial returns through operations in the secondary financial market. While economic investment aims at tangible economic benefits by investing in physical assets related to the real economy and participating in the primary market.
The risks are different
Financial investment has the characteristics of high risk and high return. There are market risks, liquidity risks, information asymmetry risks and more. Economic investment has relatively low risk, mainly project risks, policy risks, market risks and so on.
The investor identities are different
Financial investment can be carried out by ordinary investors, while economic investment often requires companies or organizations with strong capital strength as the main investors.
The returns are different
Financial investment pursues capital gains, while economic investment pays more attention to long-term and stable cash flow. In general, financial investment has higher returns and economic investment is more stable.
In summary, financial investment and economic investment have different connotations and characteristics. The former focuses on financial markets while the latter pays more attention to entity economies. In terms of objectives, risks, investors and returns, there are also obvious differences between the two types of investment.