Concept of Wealth Welfare and Investments

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Definition of Economics and Concept of Wealth and Welfare

When we talk about Economics, most people just think about money. Actually, Economics is more than that. It is a social science that focuses on the production, delivery, use, and operation of goods and services. Economics is the study of resource consumption decisions taken by people, corporations, governments, and countries. Economics focuses on human behaviour and how rationally they behave to achieve the maximum benefit out of anything. In simple terms, wealth is the abundance of materialistic possessions or resources or assets. Broadly there are two types of wealth which are as follows.

  1. Personal wealth: It means personal assets owned by an individual like house, property, lands, furniture, cash in hand/bank, stocks, shares, jewellery etc.

  2. National Wealth: It is the wealth of an entire nation. It includes public properties, government bonds held by citizens etc.

In general words, welfare is assistance aimed at ensuring that citizens of society are able to fulfil basic human needs. All examples of social welfare include government schemes and insurance schemes.

Relation Between Wealth and Welfare

Welfare is the well-being of society as a whole that is determined as the wealth of the nation. Wealth is an abundance of financial assets. Wealth and welfare are different concepts but somehow they are interconnected with each other. When there is wealth the welfare comes with it automatically. If we talk about individuals when an individual has the wealth their state of living will increase. And when there is no wealth the welfare goes down. The same applies to any country or organization. Hence Being two diverse concepts they are somehow interconnected.

What is Investment?

Investment is putting your wealth to buy or acquire some assets either to generate income or to increase the goodwill or both. Investment is always done to get some return or benefit from it. When anyone invests in something the primary intent of it is to get a great payoff in the future. As investment is oriented towards the growth potential in the future it always involves some risks. For example: If you have invested in the company may be shares, stocks etc there is a possibility that the share price may go high up and you will get benefit from it but there is always a risk as to what if the company goes bankrupt or the project that you have invested in doesn’t do well. 

Hence if there is an investment there is both profit and risk involved. Investment is always related to the speculations. Investing is basically speculating what will be the situation in the future If speculation is right that means you will earn a profit or else you will lose. Investment is also the primary way of saving for the future. 

Types of Investments

Basically, there are two types of investment that you can consider before investing in anything.

1. Growth Investment: 

Growth investment involves a lot of ups and downs as it is related to market changes. Hence these kinds of investments are suitable for long-term investors and those who are ready to take the risks.

  • Shares: It is a great way of investing as investors can get regular dividends. Dividends are a part of the company’s profit that is paid to the shareholders. The value of shares may vary and dividends will also vary according to the profits. If invested correctly shares are one of the best growth investments as they have higher returns than any other assets.

  • Property: It is also considered as a growth investment as the price of property tends to rise over a period of time. Though investing in property also has some risks but the rate of return is generally higher if speculated correctly.

2. Defensive Investment: 

This type of investment is focused on generating regular incomes rather than growth. This is the best type of investment for those who are fair risk and do not want to invest for a long period of time.

  • Cash: This includes bank accounts, saving accounts, term deposits, etc. These have the lowest potential returns. Though It can give regular returns, the rate of returns is extremely low. There is no capital growth. This investment is best for those who fear risks.

  • Fixed Interests: Bonds are the best example of fixed interest investments as this includes the lowest risk. Bonds are basically when the government or companies borrow money from investors and pay them a rate of return. They offer very low returns but it can be sold quickly.

FAQ (Frequently Asked Questions)

Q1. What are Wealth and Welfare?

Ans. Wealth is the value of assets that are owned by an individual, company, or country. Wealth is basically the total market value of all the assets and subtracting all the debts. Wealth is the accumulation of all the assets or resources. There are many ways to measure wealth. If we talk about today’s world, money is the most common way of measuring wealth. These days goodwill is also considered a valuable asset and way of measuring wealth. Welfare is the well being of society. Basically, welfare is the support that is given to people to ensure they are well being. Both wealth and welfare are very different terms but somehow they are interconnected as more wealth indicates better welfare.

Q2. What are the Types of Wealth?

Ans. According to Henry David Thoreau “ Wealth is the ability to fully experience life”. According to the common misconception, wealth is not only money or finances it consists of health, finance, relationship, time, goodwill etc. Basically, there are four types of wealth.

  1. Financial wealth: It is related to money. When we talk about financial wealth it is the freedom of spending what and however, you like.

  2. Social Wealth: It is related to status. Social wealth is related to how we interact with the world. Status is the most important wealth when living in society.

  3. Time Wealth:  It is the freedom of how and where and with whom we spend our time. Time is the most important wealth and highly perishable.

  4. Physical Wealth: It is related to health. Without physical health, achieving other health is nearly impossible. Physical health is sustainable and long term wealth.