Your coaches introduce the lesson.
Before you actually invest your money, it’s a smart idea to understand the basic concepts of investing. In this lesson, we’ll explain what investing is, common types of investments, and the difference between investing and saving. We’ll also explain how inflation can reduce your earning power, and how compounding can make your money grow.
So let’s get started! The basic idea behind investing is to put money you’ve saved into things you think will increase in value over time. There are lots of possible investments. Two examples are stocks and real estate. The trick is to buy when the price is low, then try to sell when the price is high. That’s how you make a profit!
Any time you sell an investment for a profit, your earnings are called capital gains. If you lose money when you sell your investment, you’ll have what’s called a capital loss.
Keep in mind that with investing there’s always a risk of losing some or even all of your money if the investment doesn’t perform well. That’s why you should never invest money you can’t afford to lose.
In general, the greater the risk of a loss on an investment, the greater the potential return. The lower the risk of loss, the lower the potential return.
Risk vs. return:
Click the Next button to continue.