Business Investments

I. INTRODUCTION

What is a Business Investment?

Business investment refers to the commitment of funds to a business either in an

active capacity or as a passive investor. An active investor would provide seed capital
or startup capital, pre-IPO funds or franchising finance. However, most people seek
business investment opportunities as passive investors, purchasing stocks and bonds.
Business investment decisions require a risk-return tradeoff analysis.

Creation of Business Investment Opportunities

At the international level, the World Bank Group lends around $15-20 billion
every year to finance developmental projects in the third world countries. The
International Bank for Rural Development (IBRD), International Finance Corporation
(IFC) and Multilateral Investment Guarantee Agency (MIGA) offer specific products,
such as bonds, loans and guarantees, to potential investors for financing development
in the emerging and underdeveloped economies. The IFC aids small and medium
enterprises (SMEs) in the developing world by providing capital, equipment, technical
assistance and guidance to fund these projects.

The European Bank for Reconstruction and Development (EBRD) and European
Investment Bank (EIB) promote the basic and infrastructural sectors in Southeastern
Europe in countries like Bosnia and Serbia. The Clean Development Mechanism (CDM)
of the Kyoto Protocol, which has been put into operation by the United Nations
Conference on Trade and Development (UNCTAD) in the developing countries, also
promotes a greener and cleaner world for sustainable development.

Important Business Investment Destinations

Business investment opportunities have been on good ground in India, China,

Vietnam, Singapore and the Gulf region. Also, a few African and Latin American
countries have been doing well over the past few years. There exist huge business
opportunities in Tanzania in Africa in the field of manufacturing, mining and agriculture.

In India, the state of Gujarat offers excellent business investment opportunities.

The Indian government can be credited with the surge in investment opportunities in the
country. Liberalization of the economy since 1991 has opened up sectors such as food
processing, chemicals, automobiles, oil and natural gas and telecommunications.
Besides, a slew of incentives are being offered to promote investments in the country,
including the relaxation of norms for external borrowing, capital goods imports and
customs duty reduction and tax deductions for certain sectors.

Investment opportunities in the infrastructural sector, such as roads, ports and

civil aviation, are huge in countries like India, as is in the power, coal and renewable
energy sectors. With the government allowing most of the Foreign Direct Investment
(FDI) via the automatic route in these sectors, business investment opportunities have
emerged enabling foreign investors to garnering good returns. An FDI cap in the
telecommunications sector has been raised to 100% in case of Internet service
providers according to the latest investment policy followed by the Indian government.

The development of the non-oil sector in the Gulf countries entails attractive
inward investments. Countries such as Bahrain have various sectors that are attractive
for business investment. These include the finance industry, manufacturing and tourism.
The government of Bahrain has been actively involved with the private sector for
creating investment avenues for investors from across the world. Most of the GCC
countries that attract business investment offer a tax-free environment. Investors are
permitted to own 100% of the enterprise and there are no restrictions on the movement
of capital.
II. TERMINOLOGIES
 Business Investment refers to the commitment of funds to a business
either in an active capacity or as a passive investor
 Investment Opportunities is any situation where you have the option of
purchasing something that has a chance to gain value in the future
 Portfolio diversification is the risk management strategy of combining a
variety of assets to reduce the overall risk of an investment portfolio.
 Exchange-Traded Funds (ETF) is a marketable security that tracks an
index, a commodity, bonds, or a basket of assets like an index fund.
Unlike mutual funds, an ETF trades like a common stock on a stock
exchange
 Socially Responsible Investing (SRI) also known as
sustainable, socially conscious, "green" or ethical investment, is
any investment strategy which seeks to consider both financial return
and social good to bring about a social change.
 Environmental, Social And Governance (ESG) is a generic term used in
capital markets and used by investors to evaluate corporate behaviour and to
determine the future financial performance of companies.
 Globalization refers to the tendency of international trade, investments,
information technology and outsourced manufacturing to weave the economies
of diverse countries together. In business and finance, it primarily refers to
the economic integration of global markets, but the term is also used to describe
socio-cultural integration among countries
 Pre-IPO placement occurs when a portion of an initial public offering (IPO) is
placed with private investors right before the IPO is scheduled to hit the market
 International Bank for Rural Development is an international financial
institution that offers loans to middle-income developing countries.
 International Finance Corporation is an international financial institution that
offers investment, advisory, and asset-management services to encourage
private-sector development in developing countries.
 Multilateral Investment Guarantee Agency is an international financial
institution which offers political risk insurance and credit enhancement
guarantees
 European Bank for Reconstruction and Development A bank was
established in 1991 to aide ex-Soviet and Eastern European countries
transitioning into democracies by developing free market economies
 European Investment Bank a "policy-driven bank" whose shareholders are the
member states of the EU, the EIB uses its financing operations to bring
about European integration and social cohesion.
 Clean Development Mechanism is one of the Flexible Mechanisms
defined in the Kyoto Protocol that provides for emissions reduction projects
which generate Certified Emission Reduction units (CERs) which may be traded
in emissions trading schemes.
  United Nations Conference on Trade and Development was established in
1964 as a permanent intergovernmental body. UNCTAD is the principal organ of
the United Nations General Assembly dealing with trade, investment,
and development issues.

III. SYNTHESIS
 Companies have the obligation to shareholders to make the best use of all of
their assets, and one of the best means to make use of their assets is by Investing.

There are a number of reasons to invest in stocks and other financial

instruments:

To make money. Stocks can help shareholders gain a return on their investment
in two ways: with capital gains from the stock’s price rise; and with dividends, which
companies may distribute to shareholders depending on annual income. Investors in
bonds are repaid through interest, typically paid annually.

Financial flexibility. You can buy or sell your shares anytime during the trading
day. They are liquid assets, unlike other investments such as real estate. The financial
structure of equities can give owners flexibility to be able to sell when cash is needed
quickly such as during financial emergencies.

Tax advantages. Stock investments and related investments may offer tax
rebates or other benefits. In France the Plan d’épargne en actions (PEA) or in Belgium
the stocks’ capital gains tax regime are relevant examples. These tax benefits differ by
European country and are governed by laws that are subject to change. While tax
benefits for some may prove important to some investors, they are generally not
considered the primary reason for investing in equities.

Portfolio diversity. Generally, the more potentially profitable an investment, the

higher its risk. Stocks may generate huge earnings for a certain period of time, but can
also present a high risk for financial loss. When building investment portfolio, individual
investors often choose to mix distinct classes of assets to lower risk. They also consider
an investment horizon: The longer the investment period, the more attractive it can be to
invest in to invest in relatively risky assets, such as stocks, whose profits tend to exceed
losses over time.

To help spur a company’s or an economy’s growth. By investing in company

shares, individual investors can contribute to their development; savvy investors often
choose companies that show great promise.

Investing also has disadvantages which any potential shareholder should take
into account:

Risk of loss. This risk varies by kind of assets. It can virtually be zero when you
buy a bond at its period of issuance, and then hold it in your portfolio to its maturity date.
On the other hand, an investors faces a possible loss with the same bond by selling it
before its maturity date. If the market is down, the selling prices can be lower than its
issuing price. Selling before the maturity date also poses the risk of a loss in potential
interest gains. Due to intrinsic volatility in stock prices, their risk can be higher than
bonds. In trading in warrants, you can lose the entire value of your initial investment.
Overall savvy investors limit their risk of loss by diversifying their portfolio holdings.
 Managing your portfolio. A portfolio requires proper and regular management,
especially when its owner is considering a sale of assets. In financial markets, many
find the most difficult circumstance is not buying but selling.

Gaining financial knowledge. Even if you are advised by a financial advisor, the
decision to buy, sell or hold is yours. Investing in stocks or in financial products requires
an investment in knowledge about financial products, markets and economies.

There are many types of investments and investing styles to choose from. Mutual
funds, ETFs, individual stocks and bonds, closed-end mutual funds, real estate, various
alternative investments and owning all or part of a business are just a few examples.

Stocks. Buying shares of stock gives the buyer the opportunity to participate in
the company’s success via increases in the stock’s price and dividends that the
company might declare. Shareholders have a claim on the company’s assets in the
event of liquidation, but do not own the assets.

Holders of common stock have voting rights at shareholders’ meetings and the
right to receive dividends if they are declared. Holders of preferred stock don’t have
voting rights, but do receive preference in terms of the payment of any dividends over
common shareholders. They also have a higher claim on company assets than holders
of common stock.

Bonds. Bonds are debt instruments whereby an investor effectively is loaning

money to a company or agency (the issuer) in exchange for periodic interest payments
plus the return of the bond’s face amount when the bond matures. Bonds are issued by
corporations, the federal government plus many states, municipalities and governmental
agencies.

A typical corporate bond might have a face value of $1,000 and pay interest
semi-annually. Interest on these bonds are fully taxable, but interest on municipal bonds
is exempt from federal taxes and may be exempt from state taxes for residents of the
issuing state. Interest on Treasuries are taxed at the federal level only.

Bonds can be purchased as new offerings or on the secondary market, just like
stocks. A bond’s value can rise and fall based on a number of factors, the most
important being the direction of interest rates. Bond prices move inversely with the
direction of interest rates.

Mutual funds. A mutual fund is a pooled investment vehicle managed by an

investment manager that allows investors to have their money invested in stocks, bonds
or other investment vehicles as stated in the fund’s prospectus.

Mutual funds are valued at the end of trading day and any transactions to buy or
sell shares are executed after the market close as well.

Mutual funds can passively track stock or bond market indexes such as the S&P
500, the Barclay’s Aggregate Bond Index and many others. Other mutual funds are
actively managed where the manager actively selects the stocks, bonds or other
investments held by the fund. Actively managed mutual funds are generally more costly
to own. A fund’s underlying expenses serve to reduce the net investment returns to the
mutual fund shareholders.

Mutual funds can make distributions in the form of dividends, interest and capital
gains. These distributions will be taxable if held in a non-retirement account. Selling a
mutual fund can result in a gain or loss on the investment, just as with individual stocks
or bonds.

Mutual funds allow small investors to instantly buy diversified exposure to a

number of investment holdings within the fund’s investment objective. For instance, a
foreign stock mutual might hold 50 or 100 or more different foreign stocks in the
portfolio. An initial investment as low as $1,000 (or less in some cases) might allow an
investor to own all the underlying holdings of the fund. Mutual funds are a great way for
investors large and small to achieve a level of instant diversification.

ETFs. ETFs or exchange-traded funds are like mutual funds in many respects,
but are traded on the stock exchange during the trading day just like shares of stock.
Unlike mutual funds which are valued at the end of each trading day, ETFs are valued
constantly while the markets are open.

Many ETFs track passive market indexes like the S&P 500, the Barclay’s
Aggregate Bond Index, and the Russell 2000 index of small cap stocks and many
others.

In recent years, actively managed ETFs have come into being, as have so-called
smart beta ETFs which create indexes based on “factors” such as quality, low volatility
and momentum.

Alternative investments. Beyond stocks, bonds, mutual funds and ETFs, there
are many other ways to invest. We will discuss a few of these here.

Real estate investments can be made by buying a commercial or residential

property directly. Real estate investment trusts (REITs) pool investor’s money and
purchase properties. REITS are traded like stocks. There are mutual funds and ETFs
that invest in REITs as well.

Hedge funds and private equity also fall into the category of alternative
investments, although they are only open to those who meet the income and net worth
requirements of being an accredited investor. Hedge funds may invest almost anywhere
and may hold up better than conventional investment vehicles in turbulent markets.

Private equity allows companies to raise capital without going public. There are
also private real estate funds that offer shares to investors in a pool of properties. Often
alternatives have restrictions in terms of how often investors can have access to their
money.
 In recent years, alternative strategies have been introduced in mutual fund and
ETF formats, allowing for lower minimum investments and great liquidity for investors.
These vehicles are known as liquid alternatives.

Global Trends in Business Investment

For investors these days, it’s not just about making a decent return; it’s about
making life more decent as well. Today, more and more investors are looking to match
their investments with their morals, principles, religion and beliefs than ever before.
Socially responsible investing (SRI) has gone from a fringe idea to a mainstream
framework for finding ‘profits with a purpose’.

Climate Change and Renewable Energy

While you can debate whether or not humans are responsible, the earth’s climate
is shifting and changing. That has a huge and profound effect on everything we do.
From the food we grow to the increased severity of storms and the damage they cause,
our planet’s climate is a big deal to our way of life. Figuring out ways to potentially slow
or stop the damage is paramount. With that in mind, one of the biggest trends
in ESG/SRI is the shift from fossil fuels and those that emit high amounts of carbon to
lower carbon emitting alternatives and renewables, as well as improving energy efficient
methods.

And as a potentially multi-decade play, there are several ETFs that investors can
use. The biggest could be the iShares S&P Global Clean Energy Index (ICLN A-
). ICLN tracks a variety of solar, wind and other renewable energy firms from across the
globe. The global focus is key as many top renewable names aren’t domiciled in the
U.S. Another prime choice could be the SPDR S&P 500 Fossil Fuel
Free ETF (SPYX). SPYX takes a different approach and removes stocks that have high
carbon output scores from the S&P 500. The idea is that over time, as the shift
continues, these stocks will fall by the wayside and produce poor returns.

Driverless Cars and Electric Vehicles

An offshoot of the need for lower carbon emissions, the transportation sector is
ripe for an ESG makeover. And the trend comes down to driverless cars as well as the
adoption of hybrid and electric vehicles. While driverless cars are years away, hybrids
are here today, and their number is growing. Back in 1999, there were only 17 hybrid
vehicles sold in the U.S. In 2015, that number increased to nearly 500,000, according to
the U.S. Department of Transportation.

The way to play the shift is the Global X Lithium ETF (LIT B-). Lithium is a critical
component of the batteries needed to make hybrids and electric cars work. LIT tracks a
basket of lithium miners and producers from across the world. While not the greenest
play itself, LIT is vital to making the green movement work.
 Gender Diversity

One of the biggest governance issues facing ESG is the fair treatment in the
workplace, especially in terms of compensation between the sexes. In the U.S., there is
a major disparity between what men and women earn for the same position. According
to a Pew Research Center analysis of hourly earnings of both full- and part-time U.S.
workers, women earned just 83% of what men earned.

Improving that difference has become a rallying cry of the ESG world and had led
to SPDR SSGA Gender Diversity Index ETF (SHE ) gathering more than $300 million in
assets in a short amount of time. SHE tracks a basket of U.S. large capitalization
companies that are ‘gender diverse,’ which means that there are plenty of women in
senior leadership positions and roles. There are a lot of studies that suggest that firms
with diverse leadership positions tend to outperform those with male-centric boards.

Digital Security

With the world creating more data – from smartphones, cloud computing and
even our toasters – the threat of cybercrime is real. Cybercrime is estimated to cost the
world more than $400 billion a year to fight and recover from. Corporations are starting
to take the threat seriously from a governance point of view. Loss of consumer data is
now a loss of trust and results in poor performance. While not an ‘official’ ESG ETF,
the PureFunds ISE Cyber Security ETF (HACK ) focuses on cybersecurity and tracks a
basket of software firms that are dedicated to protecting users from data breaches and
hacks.

Healthier and Organic Foods

Finally, the push to eat healthier and reduce illness before it starts has become
another significant trend in ESG/SRI. From food producers who focus on better
products to pushing unhealthy producers to change their ways through governance
actions, food has become a major battleground. The Janus Organics ETF(ORG )
focuses on companies that capitalize on our increasing desire for naturally-derived food
and personal care items.

Philippines focus its investments in BPO and Real Estate industries. In a

research conducted by global professional services firm PWC and Urban Land Institute
(ULI), Manila ranked third in terms of city investment prospects and fourth in city
development prospects this 2017.

As per the research, Manila is one of Asia Pacific’s most attractive urban hubs,
as it scored 3.68 in the City Investment Prospects, while it scored 3.56 in the City
Development Prospects in the Emerging Trends in Real Estate Asia Pacific 2017
survey. Manila beat previous “investor-favorites cities” such as Japan and Australia in
the latest survey, with fellow emerging-market destinations Bangalore and Mumbai in
India.
 According to the survey, “Philippines has attracted positive comment with a
vibrant economy led by a booming BPO market and strong remittances from overseas
workers.” Furthermore, the survey also mentioned Philippines’ strong points for it to be
considered an emerging investment destination: “vacancies remain low, office capital
values and rents continue to show good growth, and logistics industry is seeing
accelerating demand based on increased consumer sales.”

As stated in the survey, the emergence of these top four emerging-market

destinations as the top choices this year (Bangalore, Mumbai, Manila, and Ho Chi Minh)
reflects a different mandate—“the quest for yield.” These four cities were rated
“generally good,” out of 22 countries, and the rest were rated “fair.”

Globalization has resulted in greater interconnectedness among markets around

the world and increased communication and awareness of business opportunities in far
corners of the globe. More investors can access new investment opportunities and
study new markets at a greater distance than before. Potential risks and profit
opportunities are within easier reach thanks to improved communications technology.
Countries with positive relations between them are able to increasingly unify their
economies through increased investment and trade. Products and services previously
available within one country are made more readily available to new markets, resulting
directly in improved economic opportunities for workers in those economies and leading
to improved household incomes. For investors, these opportunities present a wider
range of investment options and new ways to profit. Investment in global markets is
possible for the investing public through stock purchasing, as most brokerage firms are
able to access international stock markets and provide their clients with the opportunity
to purchase shares in companies around the world.

As a result, most businesses try to stay competitive with their counterparts in

other parts of the world, broadening their competitive horizons past their local areas and
home countries. Maintaining competitiveness often requires sourcing materials
and outsourcing labor from other countries. Competitive companies have increasingly
turned to global markets as a source not only of new customers but also of production
locations and partners for new ventures. Globalization has facilitated this and made the
transition to global markets easier. Over time, these practices result in increased
cultural similarities between countries and increasingly connected economies that have
more mutual interests and challenges. Globalization and international investment are
tied together and lead into one another as companies act internationally by increasing
their international investment out of mutual interest and the need to stay internationally
competitive. Companies benefit from pricing differences, or arbitrage, in different
markets for labor and supplies. Globalization compels connected economies to continue
to invest in each other to protect their economic health and acquire new profits.
International investments have increased as a direct result of globalization and continue
to do so. This is pulling more economies into globalization, further increasing
international investment as this happens.
 When countries seek collectively to pursue the opportunities provided by
globalization, the demands of the new economic activity cause social change that
develops these countries and prepares them to better pursue industrial activity. The
society becomes a developed nation as its workforce begins to attract the investment
activity of enough companies to cause the social and economic change necessary to
produce a modern industrialized economy. This process is a result of the international
investment that characterizes globalization. The competitive nature of globalization, in
other words, ultimately has a social and economic impact that transforms economies in
pursuit of investment and greater economic activity. This knits economies into each
other and results in increased international investment.

IV. SUMMARY

Investing is really about “working smarter and not harder.” Most of us work hard
at our jobs, whether for a company or our own business. We often work long hours,
which requires sacrifice and adds stress. Taking some of our hard-earned money and
investing for our future needs is a way to make the most of what we earn.

There are many different ways you can go about investing, including putting
money into stocks, bonds, mutual funds, ETFs, real estate (and other alternative
investment vehicles), or even starting your own business.

Investors strengthen their Corporate Social Responsibility (CSR) by matching

their investments with their morals, principles, religion and beliefs. SRI has evolved into
a complex animal full of various strategies and indexes. Today’s socially responsible
funds tap into a variety of environmental, social and governance (ESG) metrics
designed to help comb the investing world for the best opportunities to match investors’

It’s no longer just about eliminating sin industries like gambling or firearms from
broad indexes. And with so many shades of gray in the world of ESG, exchange-traded
funds (ETFs) have become a major place for investors to find their SRI fix.

If I have money, I would invest in Digital Security business. As internet and

particularly wireless and mobile technologies continue to advance, becoming ever-more
present in business, new threats to security arise. Companies, who are unaware of and
unprepared for potential digital security issues risk serious data leaks and website
hacks, would need Cybersecurity companies to protect their data from hackers and data
breaches

V. BIBLIOGRAPHY
  How To Protect Your Business From Physical & Digital Security Threats

 https://www.coxblue.com/how-to-protect-your-business-from-
physical-digital-security-threats-smb/
 Investing 101: What Is Investing?
 https://www.investopedia.com/university/beginner/beginner1.asp#ix
zz51y1xqXKG
 Business Investment, Business Investment Opportunities
 http://www.economywatch.com/investment/business-investment-
opportunity.html
 Reasons to Invest
 https://www.boursedeparis.fr/en/learning-center/investing-
basics/reasons-to-invest
 Investing 101: Types Of Investments
 https://www.investopedia.com/university/beginner/beginner5.asp#ix
zz51xSARPEk
 Five Sustainable Investing Trends in 2017
 http://etfdb.com/etf-education/5-sustainable-investing-trends-2017/
 Manila ranks third in ‘Top City Investment Prospects’ in Asia Pacific 2017
survey
 http://primer.com.ph/blog/2017/01/18/manila-ranks-third-in-top-city-
investment-prospects-in-asia-pacific-2017-survey/
 What effect has globalization had on international investments?
 https://www.investopedia.com/ask/answers/022615/what-effect-
has-globalization-had-international-investments.asp