Investing Flashcards
Different types of investments
Stocks, Bonds, Mutual funds, Real estate, Commodities, Cryptocurrencies
Saving for an Investment:
The advantage for saving before you invest is that you do not have to pay interest on a loan.
However, if you are saving for a home, you may need to incur extra costs
such as rent while you are saving.
Before starting to save, it is important to work out how much you are spending and whether there are ways to spend less and save more. (BUDGET)
Borrowing to Invest:
When borrowing money for an investment, you must first ensure that you can afford the repayments.
May need to put up assets/collateral to cover the loan (secured loan).
Two types of interest rates:
Fixed interest rate - Interest rate remains the same for the period of the loan. Fixed interest rate loans give you greater control over your finances because the repayment
What is a variable interest rate?
rate that moves up or down depending on market forces. With a variable rate, you are, therefore, at the mercy of the market. Interest rates will vary considerably over time.
What is a fixed interest rate?
A fixed interest rate is a type of interest rate that stays the same for the entire duration of a loan or investment. This means that the borrower or investor knows exactly what they will pay or earn in interest, regardless of any changes in the market or economy.
What are shares?
A share is a part owner of a public company. Shares are bought and sold on the stock exchange. The price of a share constantly changes and if the price rises, you may make a profit if you sell the share. Shareholders can also gain profit receiving dividends. To purchase shares you may use a stock broker or internet broker.
investment option: property
People may invest in property to own their home (do not pay rent) or as an investment property with the intention of renting it out. Profits from property sales are NOT taxed. Investment properties can offer additional income from rent, property increasing in value (appreciating) and tax benefits.
what are managed funds?
A managed fund is made up of a pool of money that comes from many people who have similar investment goals. A professional fund manager invests this money in assets such as shares or property. A managed fund allows a small investor to be involved in the share market and real estate. These funds usually invest in both high-risk and low-risk investments to minimise risk.
what are debentures and undescured notes
A debenture is a document issued by a firm when you lend it a sum of money. The person will lend a certain amount of money to a business and the person will receive interest after a period of time. It is a relatively safe way to invest. Debentures usually offer a lower rate of interest and don’t require collateral. Unsecured notes are similar to a debenture except that holders of these are one of the last to be repaid if a firm is liquidated. They are not as safe as a debenture and consequently attract a higher rate of interest.
what is cryptocurrency?
Cryptocurrencies are digital based finances, traded in the virtual world. They were created as an alternative to typical currencies, which are controlled by bankers, government and other financial institutions. Bitcoin is one the earliest and most famous types of cryptocurrency, and is seen to be a desirable investment due to the capped (limited) amount of bitcoin available to consumers. This means that the value of each bitcoin stays high with more unable to be circulated. Cryptocurrencies are very high-risk.
