Home investment is the way a family uses their savings to earn profits and improve their standard of living.
In other words, household investment is the family’s savings that are used and risked to generate wealth. Of course, in order to invest, you must first save, and this implies being willing to give up current consumption in exchange for making a profit in the future.
Undoubtedly, domestic investments are made seeking to achieve objectives or goals in the future. That is why there are different ways of investing from the family level, according to the objectives that each family sets for itself.
Difference Between Saving and Investment
It is important to mention that, many times, the words savings and investment are considered or used as synonymous terms. However, each term refers to a different economic action.
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To begin with, when we talk about savings, we refer to a part of the income or income that a family receives. This part of the income is not used for consumption expenses. For example, if a family receives monthly income of $5,000 and spends $4,500 on consumption needs, the amount of savings is $500.
Of course, saving is necessary because it can help families cope with difficult financial situations. Like, for example, when you lose your job or when unforeseen health events occur and you have to pay medical expenses. In other words, saving contributes to protecting the standard of living of the family unit.
Therefore, when a domestic economy decides to save, it must aim to achieve goals. These can be short term or long term. In the long term, it could be to ensure the university career of the children, or to buy a house.
Whereas, when we use the term investment we refer to the accumulated savings that are used by families to obtain benefits or profits. That is, if a family uses their accumulated savings to buy a house and then rents it out. This investment could generate a profit of $1,000 per month.
Investments seek to place or use money for the purpose of obtaining a profit. That’s why families buy stocks, real estate, bonds; among some that can be mentioned.
Main types of domestic investment
Among some of the main types of domestic investment we find
1. Real estate
Naturally, many families decide to invest in the acquisition of real estate or property. Since, they consider it to be one of the safest ways to invest when you have long-term goals.
By purchasing a property, the family hopes, for example, to have their own house with which they will no longer spend on rent. Likewise, you could acquire it in order to rent it and obtain an income.
2. Stock market and shares
Similarly, families can invest by buying shares on the stock market. When you buy a share, you acquire the right to a part of the value of a company. So, this investment can generate profits or gains on the capital invested. In this case, families could acquire shares of different companies. Considering the future possibility of obtaining performance in the long term.
Obviously, the stock market is where more money moves and can generate many benefits. However, it is not a form of investment that is easy and simple for anyone. Therefore, it is convenient to know the market and learn to invest. That way you can have less risk. Since, just as you win, you can lose.
3. Investment funds
Additionally, families can use their savings in investment funds. In an investment fund, families jointly place their savings in an investment portfolio. These joint savings find better investment opportunities.
The investment portfolio may include stocks and bonds. The bonds can be national and international, fixed or variable income and short, medium or long term.
Home Investment Tips
When making domestic investments, the following is recommended:
- Have a savings discipline, because without savings you cannot invest.
- When making investments, they should be done in a prudent way, so as not to take too much risk.
- Get used to investing regularly and systematically, only then is it possible to increase capital and wealth.
- Deciding early to invest, since the faster the family decides, the sooner they will be able to obtain the benefits.
- Diversify investments to run less risk.
Aspects to consider when making a home investment
The aspects that should not be neglected when making a home investment are:
- Define and have clearly defined investment objectives.
- Study to know the different investment instruments.
- Examine and compare the risk level of each investment option.
- Analyze the different investment options and choose the most appropriate.
In conclusion, it can be stated that domestic investment is very important for any family economy. Since, it allows us to secure our future against any eventuality and allows us to increase the financial capital and wealth of the family.
Of course, before investing, every family should be informed about all the options and the risks that each one entails. This with the purpose of minimizing the risk of each decision.