Investment Theory Guide

Before you even consider investing or putting together a financial plan, understanding the principles behind investing is crucial. Having this knowledge is key, it will underpin many of your financial decisions arounds investing into things like Stocks ISAs or pensions and how that translates into life goals e.g early retirement or a kids education fund!

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Jamie P
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As you’d expect, investing is a broad and complex area and the right strategies differ hugely, especially based on your timeframe or age. So, we’ve put this together aimed at those still of working age and with time ahead to continue amassing wealth.

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The major ‘liquid’ asset classes:

By liquid, we mean fluid i.e they’re accessible and good for financial planning. Alongside this, many people will have property, business interests or even crypto assets which we will cover off under separate specific guides (insert link).

What are shares?

A share is effectively your stake in a public traded company (plc), sometimes called a listed company i.e listed on a stock exchange like the UKs FTSE 100 or the USs S&P 500. Not unlike owning a property, the number of shares you own can’t be taken away from you, unless the company goes bust or sells out / merges, in which case you’ll get a payout or shares in the new co. Also like owning property(s), the value of each share you own fluctuates, every single day.

Sometimes people get spooked by shares, mainly because the ups and downs of a share in a company are fully visible, whereas, the property you own is worth what its worth at the point of sale, you’re not too bothered about the interim fluctuations.

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What are bonds

Bonds are essentially you loaning your money to a government or institution in return for a fixed return also known as a coupon. (insert explainer via investopedia). In practice, the average person would have access to ‘bonds’ via a fund, not unlike how you might have shares via your pension fund.

The manager or institutions in charge of those have a remit, for example in the UK, a lot of people are in ‘managed’ pension funds which means you choose a risk level and they will use a balance between stocks, bonds and property to manage risk, possibly even some.

Investment bonds traditionally are traditionally used to offset the stock market risk of equities. Historically, when stock markets drop in value, bonds tended to the opposite (explain) which acted as a

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Find out the best tricks and tips to living life anywhere you want.

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Ab Hadley
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