As I previously mentioned in one of my blogs, Savings is the perfect resource to make our dreams come true, if the purpose of saving is to investing in ourself for the future. It is one of the smartest ways to use and control money, without risk. Because it allows us to buy and get what we want without affecting our finances. In addition, that it offers security and economic stability for us and our family, whether in times of abundance or austerity. But just like savings, there is another financial option, very bold, that allows us to use our economic resources with the goal of obtaining extra money or higher profits, assuming a risk. This action is known as investment.
“ The term investment refers to the act of postponing the immediate benefit of the property invested for the promise of a more or less probable future benefit. An investment is a limited amount of money that is made available to third parties, a company or a set of shares in order to increase with the profits generated by that business project.” Definition published on www.bbva.com, in its article What is investment?. Presenting a very exact and adequate definition for the purpose of this blog. Which is to present a real and more daring financial option to increase our money and in turn improve our lifestyle, maintaining economic strength.
It is very important to understand that when making the decision to invest, it is necessary to know and evaluate the type of investment that we want to make and the variables that affect them. Recognizing that the action of investing, in addition to presenting an opportunity to increase our profits, also represents a risk. So there is no general formula for investing, which guarantees your success. Each investment must be evaluated individually according to the resource (land, time, work or capital), its element (machinery, buildings, investment in participation, etc.), the selection of the field (business, personal or financial) and finally the selection of its nature (private or public). Data of great relevance in the development of our investment plan.
At the time of executing our investment plan, in adding to know and determine the type of investment. It is of vital importance, first to know the profitability or performance of it. In simpler terms, this expresses that we must know exactly the benefits that we will obtain in exchange for the investment. Which brings us to the second step, knowing investment liquidity. In this way we will not only be aware of our ability to invest, but also of our ability to convert an investment into money, which will help us to predetermine how quickly we can recover our investment with minimal losses. Remembering that, every investment represents a risk, so the higher of the investment, the greater the risk we face. That is why it is very important when investing, the control of the time variable. This means that we can determine the term of the investment, which can be short, medium and long term.
Fortunately, there are entities such as investment banks, companies that offer very detailed guidance on the subject. But more importantly, these companies, as explained in detail in the Investment Bank Article on www.britannica.com; they are the ones that originate, subscribe and distribute the new issues of securities of different public and private agencies in the market. Its operating system begins by buying the entire issue of securities of a corporation at one price, and then selling small issues at a higher price, in order to obtain a profit and cover the costs of sale. In addition, they have the responsibility of establishing the public offering price by having extensive knowledge of current interest rates and yields in the investment market. On the other hand, there are also other financial organizations such as investment trusts, which unite all the funds of their shareholders with the aim of making different investments. Therefore, the world of investments is very wide and offers great opportunities for financial growth.
Definitely, investment is a very bold financial resource that gives us the opportunity to use our money to increase our profit, make our dreams come true and improve our economic stability, assuming a risk. It is worth learning and remembering that knowing the type of investment, its profitability, liquidity and the selection of the appropriate term are variables or key elements, which undoubtedly help us to discern if the investment is viable and if we should be conservative or more aggressive in executing our plan. Without losing the perspective that investing always represents a risk.
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References:
López J.F. (2018, July 13). Inversión.[Investment]. https://economipedia.com/definiciones/inversion.html
(2018, March 14). ¿Que es la inversión ? [What is investment?] https://www.bbva.com/es/que-es-la-inversion/
Britannica, T. Editors of Encyclopaedia (2021, October 28). investment bank. Encyclopedia Britannica. https://www.britannica.com/topic/investment-bank
Britannica, T. Editors of Encyclopaedia (2016, October 17). investment trust. Encyclopedia Britannica. https://www.britannica.com/topic/investment-trust
Britannica, T. Editors of Encyclopaedia (2020, March 26). investment. Encyclopedia Britannica. https://www.britannica.com/topic/investment
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