There are 2 ways to earn income: work for money and make money work for yourself. More and more people are choosing the second option. However, not every one of them can be called an investor. So who is a qualified investor? Who is an investor in general and what is investing? Usually people make mistakes thinking they know the answers to these questions.
What is investing?
Imagine that you opened an account with a Forex broker, replenished it with 300,000 rubles and decided to make money on the difference in exchange rates. Will such an investment be an investment?
At best, this will be speculation. At worst, a game of chance. But in either case it will not have anything to do with investing.
Imagine a different situation. You heard on television that Gazprom shares have been growing over the past 3 years. You immediately take your 300,000 rubles and open an account with a broker. The day after you bought the shares, Alexey Miller announced a global layoff. And the company's shares soared 3%. You immediately sold them and made a profit - almost 1000% per annum.
But will it be an investment? And again, no. This is just an example of successful speculation.
How to act correctly?
So what is investing? This is the plan. In The Rich Dad's Guide to Investing, Robert Kiyosaki compares investing with travel.
The first thing you do is start planning your “route”. You know point A - your current situation. You also know point B - your financial future, as you would like to see it. Now you need to somehow get from point A to point B. What do you use for this? Decide to save a certain amount on a deposit? Buy stocks or mutual funds? Focus on real estate investments?
Important: there is no "good" and "bad" transport. Its task is to deliver you from point A to point B. Use the “transport” that will be most effective at the current time.
You do not fit the boat to move on land. Similarly, stocks will not suit you if your investment horizon is less than 5 years — it would be inefficient and risky — how to travel by land on a steamer.
Investing: a step-by-step scheme
Accordingly, to invest, you need:
- define point A - draw up a financial report;
- define point B - set goals;
- choose "transport" and think over the "route" from point A to point B.
This is investment - just following the plan of getting from A to B. Robert Kiyosaki called it "a mechanical and boring process of practically guaranteed enrichment." The problem is that it is too mechanical and boring. However, this is the path of a real investor.
Most come to the market without a plan and understanding of the work of various instruments, just tickle your nerves. They board the bus and hope to cross the ocean on it. Then they jump into the “plane”, despite the fact that heavy cloud cover is announced. And after that they try to attach wheels to the “leaky boat” in order to move on land.
It's like in a casino - you can have fun, but you can’t earn, at least in the long run.
Who is an investor?
It is clear that this is a person who makes investments. Here the question is different - how and why does he do it? Why you can’t just make more money - why you need to invest? And what is the difference between investment and speculation?
Few people thought about this, but there are 3 types of income: earned, passive and portfolio. Most often, people deal with the first of them - earned. He helps them not to starve. A passive and portfolio income gives wealth.
So, an investor is a person who turns his earned income into a passive or portfolio one. That is what his plan is aimed at. An investor buys to never sell.
A speculator is a person who is trying to buy cheap and sell expensive. This is his job, and its result is earned income. This is not at all what the investor seeks.
So what is the difference between these types of income? In the first option, you work for money, in the rest, money works for you.
Examples of 3 types of income: earned
Almost everyone is familiar with earned income. This is a salary, income from professional activity or from business. A doctor receives a salary, a lawyer receives money for the consultation, and the owner of the company receives income from its activities.
The main difference between this income and the rest is that a person has to work to get it. And not only at the enterprise. The provision of services, the management of other people's capital in the stock market, doing business are all different types of work. A man exchanges his work for money or other values.
Passive and portfolio income
But 2 other types of income are not so common. Nevertheless, one can give well-known examples of such income. The monthly interest on a bank deposit is a passive income. To some extent, pension can also be included here.
And here are not such common examples of passive income: shareholders of the company annually receive dividends on shares, the franchise owner receives passive income in the form of royalties - a monthly deduction for the right to use the brand. Rental income is another example of passive income.
Passive income is the regular payments received from assets generating cash flow. This may be intellectual property, real estate or other assets.
But what is portfolio income? This may include profit from the difference in the exchange value of securities - shares or bonds. This type of income can be obtained by giving your money in trust, by acquiring shares of a mutual fund or by investing money in the stock market yourself.
The following example will help you better understand the difference between portfolio and earned income. Imagine that the fund manager doubled your money. For you, this is portfolio income - because you did not have to work for this yourself. But the commission you paid is the manager’s earned income.
Who is the qualified investor?
From the point of view of the law, it is an investor who satisfies any of the following conditions:
- invested more than 6 million rubles of personal funds in securities or their derivatives;
- worked in an investment fund for at least 2 years, if this fund itself is recognized as a qualified investor, then at least 3 years - otherwise;
- concluded transactions for a total amount exceeding 6 million rubles with securities or their derivatives for the last year, with an average of 10 per quarter and at least 1 for the last month;
- It has assets of 6 million rubles or more, and only cash in bank accounts, certificates for precious metals and securities are taken into account.
In addition, as a qualified investor, the requirements of the law are recognized by a person who has graduated in economics at a state educational institution and has been certified as a professional participant in the securities market, or has received one of 3 international certificates: CFA, CIIA or FRM.
A legal entity can also receive the status of a qualified investor. However, the requirements will be more stringent. It is also sufficient to fulfill any of the conditions:
- capital is 200 million rubles or more;
- each quarter there are 5 or more transactions with securities, with their total value exceeding 3 million rubles;
- 1 billion rubles of revenue in the reporting period;
- assets worth 2 billion rubles.
By law, this is enough. However, is it possible only on the basis of these data to really call a person or company a qualified investor? This is not true. Let me suggest an alternative point of view on this issue.
Is this a qualified investor?
A person can earn 6 million rubles. Buy stocks on them. But does this make him a qualified investor? In terms of law, yes. The government believes that a person who has earned such an amount is able to take care of himself, so he does not need to be protected from "risky" investments - in securities for qualified investors.
But is this really so? A competent investor plan, his experience and skills in managing financial instruments speaks much more about investor qualifications than he has money. Although the money from a qualified investor will also be.
Alternative opinion: who is a qualified investor?
Below is an alternative list of conditions in order to recognize an investor as qualified (all items must be met). So, qualified investors are those who:
- knows the difference between assets and liabilities;
- clearly follows the plan, but is always ready to adjust it according to the situation;
- converts earned income into passive and portfolio;
- knows the difference between fundamental and technical analysis, successfully applies both in practice;
- ready for any events on the market, and does not wait for these events with hope;
- owns the appropriate terminology;
- understands not only investment tools and procedures, but also the legislation on securities, and also uses civil and tax codes to his advantage, reducing costs;
- uses the team: brokers, advisers and consultants, but does not rely solely on them - responsibility for the decisions made always remains on him;
- strive for simplicity - capable of explaining the essence of each investment to a six-year-old child in 10 minutes.
How to become a qualified investor?
Robert Kiyosaki answered this question best of all in his book Rich Dad's Guide to Investing. In his opinion, 3 things are needed to become a qualified investor. It:
- skills - there are 2 ways: get a financial education, study investment tools and procedures or hire a consultant, but in this case you will have to get basic knowledge and skills - you must communicate with a specialist in one language;
- experience - get an education "on the street"; you cannot learn to ride a bicycle while reading books;
- excess money - come yourself, with experience and skills.
To summarize
A similar alternative is followed by Warren Buffett, the number 1 fundamental investor in the world, and Robert Kiyosaki, a brilliant marketer, businessman and investor with 40 years of experience.
According to Robert Kiyosaki, a qualified investor has leverage that helps him reduce risk to a minimum.
A person who does not meet these requirements, but who has 6 million rubles, comes to the market more as a player than as an investor. Perhaps he would have a better chance of winning in a casino.