Investments need not be daunting. Let us take the first step into it by getting familiar with some of the terms.
Saving vs. Investing
Saving money in banks can keep our savings safe, and easily accessible. Investing is promoted by financial advisers, though, because keeping money in banks with low-interest yields low returns. In the long run, the little amount our savings have earned could be gobbled up by inflation.
Investing entails an active use of money to earn more money. Investing has risks though so entering this realm requires diligence on our part and awareness of current events. Stock Market London warns that failing to catch major developments runs the risk of making uninformed financial decisions.
Shares and Bonds
There are different types of investments such as shares and bonds.
Shares are our stake in a company. If we have a share of a company, we will get a dividend from the company’s profit or gains.
A bond is a loan we give to a company or the government. Here, we have an agreement with a company or government agency when they will return our money and what the rate of interest is. With bonds, we can get 100% of our money back plus the interest, so this is a low-risk investment.
The stock market is where people trade shares or fractions of a company. Companies sell shares as a means to raise capital for their ventures.
The returns on our investment will depend on how the company is performing. However, a multitude of other factors decides a company’s performance; these other factors include political stability and even the weather. This is where the risk comes in. If the company you invest in does not perform well or if the factors mentioned above go against you, you could lose money.
There are more terms we have to be familiar with, along with the mechanisms involved in investing. But keep on reading and researching. There is a lot of readily available online information and even enthusiastic financial advisers who answer queries for free.