The concept of investing can be summarized in “allocating a resource, so that it can have a return in the future” .
Simple and straightforward end of the post.
Ok, that’s not true, it’s not that simple.
Everything is investing
I can allocate various resources, money, time, know-how and receive others in return.
Examples of different investments:
- University: money and time for knowledge and certification.
- Work: time and mental health for money
- Read a book: Time for knowledge or fun.
Ok, so everything you do is an investment.
Attention! Because even the things you don’t do are an investment.
What do I mean?
Do you decide to live in your home?
You’re investing the rest of your life to spend it in that house. This means you are investing in having a car if you have to move or redo the roof or whatever that house entails. You are also investing the earnings you could earn if you sold that house and invest that money in the market.
In economics it is called opportunity cost. It is the cost of not exploiting an opportunity.
It is difficult to evaluate everything from an economic point of view and in my opinion it is also counterproductive. There are characteristics of an investment such as the time and / or stress we save or the quality we gain that are difficult to measure. But there are things that can be taken into consideration in a universal way, of course everyone will put different weights and values.
Things to consider with 2 practical examples.
Case 1: Investment in the market
Case 2: a degree program
- objective: we do not invest to invest, but we do it for a goal.
- get richer
- be more usable in the world of work / increase my knowledge in one area
- Spendability of the investment: I can resell that investment to someone in the future.
- liquidity of the investment
- the degree can help me in other areas.
- Investment strategy: Every investment must have a plan
- buy what I consider good, not what the trend says
- I have to finish my degree in x years with y grade
- Know what you invest in: you cannot acquire something if you do not know it
- Study an action to understand its business model
- I know the university and I know the possible jobs required by that degree
- Know the investment costs
- Costs of buying and selling, brokers, taxes, …
- graduation fees, other fees if you are out of the course, commuting, rent, …
Now the concept of investing is clear to you, remember that in every area you can find risks and benefits for your future successes, you just have to analyze them carefully.