It makes sense to explore investing in the sharemarket. Here are three financial basics to know before you get stuck in.
Between June 2011 and June 2021, the ASX200 returned an average of 9.3% each year. That’s a lot better than your 0.01% savings rate. And, investing generally has a much lower barrier to entry than a 20% house deposit.
So, it makes sense to explore investing in the sharemarket. Here are three financial basics to know before ya get stuck in.
Compound interest is the interest you receive on your initial investment…as well as the interest you earn on that investment.
It’s like interest…on interest. And it’s what makes investing so appealing. Say you invest $1,000 into the ASX200. After the first year, that $1,000 earns 9.3%. Your investment is now worth $1,093.
The next year, you could earn 9.3% again. So, your investment is worth $1,195. Beauty!
Get the low down on compound interest here.
An exchange-traded fund (ETF) is a popular way to invest in the sharemarket. It’s like a pool of different shares all traded in the one vehicle.
The best part about ETFs is that you get access to a range of different shares, so you spread out your risk.
We compare ETFs to Pokémon cards here.
A share portfolio is another name for an investor’s shareholdings. It’s a collection of shares that someone invests in.
A diversified share portfolio is a portfolio where the investments are spread out across different asset classes (i.e. some in cash, some bonds, some shares…). The idea is, when one asset is performing well, it mitigates the bad times in other asset classes.
Think about it like a night out at your favourite restaurant.
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