INVESTING FOR BEGINNERS

Investing for retirement is that pillar of personal financial planning that helps you feel financially confident even after your active income stops. It is a crucial step that you must take if you desire to safeguard your financial future and have more control over your livelihood in the long-term. Some countries do offer the safety nets of government pension plans and social security to their citizens, but when that’s not an option, investing for retirement can provide you with a steady, sustainable, income stream.

Leveraged investing is when you set out to gain a higher profit by investing borrowed money. Higher profits come in when your return on investment is higher than the interest paid to a lender. Although it can reap higher rewards, as we’ve learned, higher rewards often come with higher risk.

The value investing approach believes that the market is not always efficient. This means that a price quoted may not always be reflective of the fundamentals or intrinsic value of an asset. When an investor chooses to buy an asset that’s priced lower than its intrinsic value, this is called value investing. Simply put, the idea rests on selecting currently undervalued stocks that may increase in value in the future, ultimately yielding growth.

Index funds are a type of mutual fund that replicates the return of an index. An Index fund consists of stocks from a variety of companies whose stock prices reflect the value of an index. For example, fortune 500 companies, emerging markets or real estate. Indices are often used as broad indicators of how a select set of companies or a market or a sector is performing that the index is representing.

Hybrid funds are exactly what they sound like. They are mutual funds that invest in multiple assets classes at the same time, with the minimum being two. These can be assets such as Equities, Debts, Cash, Gold and more.

Wealthy people have one secret that helps them stay ahead – they manage their assets well. Surprisingly, efficient management of wealth is actually more important than earning it. But it’s not as easy as it sounds. Managing wealth efficiently can be tricky, complicated, and sometimes volatile. Many people spend their whole lives figuring out how to do that effectively, that’s where a wealth manager comes in.

Yield is the expected return on an investment, or in the case of bonds – interest received from holding a security.

A yield curve shows yields by maturity. Typically, it depicts average yields on short, medium, or long-term maturity investments on a given day or week of trading. Therefore, it’s very important to take note of exactly which yield you’re looking at when making your investment decision.

While time deposits guarantee a fixed return in the decided time period, mutual funds offer market linked performance, thereby offering a potential of a higher return, subject to market risks. Assess the amount of risk you’re willing to take on and remember to invest as per your risk profile and in line with your goals.

Bonds provide a worry-free stream of income and are among the most valuable tools in your investment kit. Because they pay interest regularly, they are a good choice for investors - such as retirees - who prefer a constant stream of income.

The key to levelling out the purchasing power of your savings is allowing your savings to grow faster than inflation in the economy. This is where a disciplined investment plan with a balanced asset allocation, time horizon and risk profile comes to the rescue.

Time value of money is the idea that an amount of money is worth more today than the same amount at some point in the future. This is because of the earning potential of that money. Time value of money looks at how much money can be worth if invested now as opposed to later.

Your Investor Profile to investing is what a driver’s license is to driving. You don’t start without one. If your investment products don’t fit your profile, the potential risk is an imbalance in your overall asset allocation, meaning you might be putting too many or too few eggs in the wrong baskets.

Equity, bonds, commodities, and cash equivalents. There are so many product classes available to invest in, and the process of deciding how much money to invest in which products is called asset allocation.