Lesson4- investments Flashcards
Diversification
An investment strategy used to reduce the risk of major financial losses by spreading the investment across various types of assets and markets.
Different methods to diversify money
Saving accounts, bonds, mutual funds, stocks, real estate, cryptocurrency
Diversification methods for saving accounts
Money in the saving accounts are normally well protected by the government so that the risks of losing money are really low.
Bonds
There are 3 types of bonds, which are corporate, municipal, and federal government. You can diversify the money in order to distribute the risks by spreading into those 3 types of bonds.
Mutual funds
Mutual funds are made up of stocks, bonds, and other investments. Therefore you can diversify your money automatically just by investing into mutual funds.
Stocks
First, it’s necessary to spread the wealth, also it’s vital to research about the companies in different sectors.
Real estate
Invest in different types of properties, such as residential, commercial, and retail. You also should disperse the properties geographically.
Bitcoin
Investing in different sectors, and diversifying by timing.
Rare item
Take advantages of the latest technologies, and diversify internationally.
Commodities
Buy an ETF that owns a portfolio of them. Also it’s important to invest in basic goods necessary for the production of other goods and services.
Pros to investing
High rate of return
Exceed the rate of inflation
Cons to investing
The yield is not guaranteed
Some risks of losing money
Capital gains
Profits from the sale of a capital asset, such as stocks, bonds, or real estate
Capital loss
Incurred when there is a decrease in the capital asset value compared to an asset’s purchasing price.
