What’s the point in investing?
Investing is the process of providing money now, in return for some future profit.
The most common reason for investing in the western world is to save for your retirement.
And the industry is huge!
Superannuation in Australia has a record $2.3 trillion dollars invested as at March 2017.
This money is the combined savings of every employee or retiree that has ever contributed to a retirement fund in some way.
Different types of return from investments
An investor makes a return on their investment in two possible ways.
The first way is through income.
Products such as cash and bonds offer interest income as an incentive for investors to loan or deposit money.
These returns are either fixed or variable.
Generally the higher the interest rate, the riskier the loan. Though most cash and fixed interest products are relatively safe assets.
That is because your capital, the amount you originally invest, is usually returned in full.
The second way of making a return is through capital gains.
Shares and property are the two main asset classes that offer this possibility.
A capital gain is simply the value of your original investment going up over time.
But be aware that the possibility of losing money is also present in such investments at a comparatively high degree.
Some assets offer both type of return.
For example, a property combines income in the form of rent along with a possibility of capital growth over time.
Similarly, a lot of stocks pay part of their profits back to shareholders in the form of dividends.
Individual investors choose different investments based on different goals and opinions.
You should always make sure you invest according to your individual preferences. And make an effort to understand the risks and returns of your investment portfolio.
Our editors and analysts here at Port Phillip Publishing often write about investing and investments. But you won’t find the same tired analysis here as in the mainstream press.
We pride ourselves on our independence and on never following the crowd. You can find all our articles on investing on this page.