You don't need to take an economics or finance course to learn how to invest, but it is important to understand these basic investment concepts.
Risk and return
Return and risk always go together. The higher the potential return, the higher the risk. You should never blindly pursue high-return investments. Bear in mind your investment goal, investment period and risk tolerance. Always choose an investment that is suitable for you.
Risk diversification
Any investment involves risk. You cannot avoid it, but you can manage your risk exposure with the right strategy to reduce the chances of major losses. The simplest and best way is to diversify your investments and spread your risk. An effective way is to diversify your investment to different asset classes, such as stocks, bonds, deposits etc.
Dollar-cost averaging
This is a long-term strategy. You regularly (e.g. monthly) invest a fixed amount, whatever the share price. In the long run this balances out the cost of buying shares and lessens the effect of short-term market fluctuation.
Compound Interest
Your principal (original money paid in) grows because of the interest earned, so you get a higher return. It’s a snowball effect – the longer you invest, the more you benefit from compound interest. Therefore, it is important to start saving and investing early.
Inflation
For the past few decades, there has usually been inflation in Hong Kong. Your investment needs a return rate that matches or beats inflation. If not, then your money will be worth less.
Find out more from our animation series to help you better understand the basics of investing.
These five pillars – ESG investing, community impact investment, shareholder engagement & policy work, direct private investment, and philanthropy – can be practiced individually or collectively, enabling you to maximize the positive impact of your wealth while also benefiting others and the world.
This sort of five percent rule is a yardstick to help investors with diversification and risk management. Using this strategy, no more than 1/20th of an investor's portfolio would be tied to any single security. This protects against material losses should that single company perform poorly or become insolvent.
The 5 Pillars (5P) approach is a cognitive behavior therapy-based innovation, designed to be integrated into existing maternal and child health programs. It aims to reduce distress in women living in socioeconomically deprived settings and to improve health and development outcomes in their children.
Starting early is one of the best ways to build wealth. Investing for a longer period of time is widely considered more effective than waiting until you have a large amount of savings or cash flow to invest. This is due to the power of compounding.
We've reviewed the five key characteristics of any investment: return, risk, marketability, liquidity, and taxation. You should evaluate these characteristics whenever you're considering an investment.
Introduction: My name is Merrill Bechtelar CPA, I am a clean, agreeable, glorious, magnificent, witty, enchanting, comfortable person who loves writing and wants to share my knowledge and understanding with you.
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