EXPLAINED BY YOUNG PEOPLE FOR YOUNG PEOPLE 👨🎓👩🎓
Compressed Guide To Investing, Asset Classes, Risk-Reward Relationships And The Five Golden Rules
What's happening?
When we invest, money is put into something that is expected to appreciate over time. Therefore, investing has the potential to outperform the humble savings account in terms of yield. However, that always comes with a greater level of risk, so the opposite could also occur!
What can I invest in?
So now that we know what investing is, let’s find out what we can invest in. Listed further below are some of the popular types of investments.
TIP: each investment has a risk-reward trade off, so think about your appetite for risk beforehand and thank us later. For more on the dangers of risky investments, see our case study of KSI's investment in Luna on our Instagram highlight 'Case Study'.
So....When Can I Read The Rewards?
1. Your time horizon is important. So you'd need to decide between an accumulation vs income strategy. A good way to start is by asking yourself the following question; do you want to receive an income now or grow your net worth over time?
2. In an accumulation fund, the earnings are reinvested, increasing the likelihood that your investment will continue to increase in value over time.
3. In an income fund, whatever profit the fund earns is given right back to you. This is sometimes called Dividend or Capital Gains. Income fund are usually popular with retired pensioners and used as a 'top-up' income.
4. Accumulation funds could provide you higher profits in the long-term if you can invest for a longer length of time. Investing for income, though, may be a wiser short-term plan.
Five Takeaways For You
1. RISK-REWARD RELATIONSHIP WITH INVESTMENTS: The higher the returns on an asset, the riskier it may be. The rate of return and volatility may have a trade-off.
2. DIVERSIFY: Minimise the level of risk while investing, by investing in unrelated assets. Example, Art vs Pharmaceutical
3. DO YOUR RESEARCH: Understand what type of asset best suits you. Double check the financial advice given and be aware of scams.
4. PRIORITISE DEBT PAYMENTS FIRST: Clear your debts ahead of investing. Target debts with the highest interest first.
5. RESPECT THE POWER OF COMPOUND INVESTING: Learn to reinvest! This may generate larger cumulative returns over a period of time
5MINS GUIDE TO INVESTING 👇
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