10 Things You Need to Know Before You Start Investing

The risks you should take, and the ones you shouldn’t

Photo by Austin Distel on Unsplash

So, you are curious about investing, but you aren’t sure where to start? These are 10 key things you need to know before you begin.

1. Understand what you are investing in.

When you invest, you are purchasing financial assets. Here are some common examples:

• Bonds are obligations of debt, typically created by governments and corporations. By buying a bond, you hold a share of that government’s/corporation’s debt, and you are entitled to receive repayments on that debt. Bonds are typically less risky than stocks, but pay a lower return.
• Stocks are a way of owning a small part of a company. Stock owners are called shareholders, and you can make a return through the appreciation (increase) of the stock price and dividend payments made to shareholders. Purchasing individual stocks can be very risky, but the potential returns are much higher than bonds.
• Funds are managed by investment managers and are formed of stocks, bonds and other assets. Funds can either be passive or active. Passive funds track indices like the S&P 500 (the 500 largest publically traded US companies). Active funds are managed by fund managers who…