Independent investments are capital invested in companies without any relation to other investments. Individuals and companies invest in shares or bonds for various reasons, such as generating passive income, retirement income, or creating strategic relationships. Diversification helps limit investment risk, and international investing is a way to benefit from emerging markets.
An independent investment represents the capital that individuals or companies invest in companies. Standalone investments are not related to any other investment in a company. People generally invest capital by buying company shares or bonds. Companies can make an independent investment in multiple ways. In addition to buying shares or bonds in a company, companies can also make a direct investment in the company. Investments can be purchased through a private investment company or brokerage house.
Individuals and companies often make independent investments for a variety of reasons. People make investments to generate future retirement income, passive income streams through dividend payments, or a fixed rate of return through corporate bonds. An independent investment can be short or long term. Long-term investments tend to carry more risk, as investors leave their money in the investment for an extended period of time. Short-term investments may offer lower returns. However, people and companies will receive their money and financial returns faster than other investments.
Companies make independent investments for various reasons. In addition to generating passive income streams through dividends and earning a fixed yield from corporate bonds, companies make investments to create strategic relationships with other companies. Strategic relationships ensure that firms have a sufficient supply of economic resources to produce consumer goods or services. Business relationships can also involve a company’s supply chain. A supply chain is the way manufacturing or production companies get products into the hands of consumers.
Independent investments can also create subsidiary relationships between companies. Companies that make less than 25 percent direct investment in another business are often said to have a non-controlling interest. Investments between 26 and 49 percent often lead to a control relationship where a company can make management decisions for the subsidiary business. Direct independent investments of 50 percent or more generally create an ownership interest in the business relationship. Parent companies are generally responsible for reporting subsidiary company information in a consolidated financial statement format.
People often make multiple independent investments to diversify risk. Risk diversification assures people that a single investment cannot sink their investment portfolio. An independent investment can represent significant amounts of risk for individuals and businesses. Investment risk can be limited through the use of diversification. Diversification allows individuals and companies to make different types of investments to avoid high levels of risk.
An independent investment may also be made in a different business industry or in a foreign economic environment. Foreign investment allows individuals and companies to benefit from emerging or developing international markets. International investing is a traditional way of diversifying investments.
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