Investing Facts – Money & Finance
Investing is one way of making your money go to work for you. Savings accounts will not give you great interest rates.
People who invest their money are gamblers.
They are gambling that their investment will grow over time.
There are many ways to invest your money. Some types of investments are bonds, precious metals, real estate, mutual funds, and stocks.
Stocks
Companies issue stocks that represent a small part of the ownership.
So when you purchase some stocks in a company, you are hoping that the company will increase in value and so will your stocks.
Stocks that are available for you to purchase are listed on a stock exchange, such as New York (NYSE0, London (LSE), Shanghai (SSE), Hong Kong (SEHK) and many others around the world.
More: How the stock market works
Mutual Funds
A mutual fund represents a group of stocks. This is one way to buy stocks but not have to buy them individually.
Bonds
A bond is like a loan. You are loaning your money to a company or a government.
Real Estate
You buy a building or a share in a building hoping the value will increase and provide you with more money than you invested when you sell.
Precious Metals
These include gold, silver, platinum and others that are listed on an exchange. You have to be patient and not be tempted to sell too early.
Brokers
Investing always involves risks. There is a risk that whatever money you invest will decrease in value over time and not increase. There is never any guarantee.
If someone tells you about a ‘sure thing’, they are lying to you.
Most people are not experts in investing, so they turn to a broker to help them make good decisions.
Banks have a division that deals in investing, but they are not brokers. They buy whatever stock you direct them to buy.
They do not provide advice. Brokers will advise you about stocks they believe will go up in price and, therefore, make money for you.
The trick is to find a broker that you can trust to give you good advice.
Today, almost everyone deals with their banking and brokers online. There are two types of online brokers: full-service and discount.
Full-service brokers
Full-service brokers provide financial advice on stocks but also about saving for your retirement.
These brokers usually deal with people who have a lot of money to invest (in other words, those who have a high net worth).
They charge huge fees, perhaps an annual membership, and a percentage of your transactions or a percentage of all their client’s assets.
Discount brokers
Discount brokers are very popular as the fees are minimal for each transaction. Banks usually have a discount brokerage and also have a section for you to learn how to invest.
Quiz Time
QUESTIONS
Name five types of investments.
What are stocks?
Name 3 stock exchanges.
Why do people use a broker?
What is the difference between a ‘full-service broker’ and a ‘discount broker’?
ANSWERS
Five types of investments are real estate, stocks, bonds, mutual funds, and precious metals.
Stocks are what companies issue so that people can buy them to own a small part of the business.
Three stock exchanges are the New York Stock Exchange (NYSE), the London Stock Exchange (LSE), and the Hong Kong Stock Exchange (SEHK).
Most people are not experts in investing so they turn to a broker to get advice.
Full-service brokers provide advice and charge a lot for their service and discount brokers do not give you advice and the fee to buy and sell stocks is very low.
