The basics of investment
Investing requires you to give up the opportunity to spend money you have today in order to earn more money (that will be available for you to spend) in the future. In other words, you are making a sacrifice of a certain amount today for the potential to receive an uncertain amount and benefit from the investment at some point in the future. An investment in a growth asset does not carry a guarantee of how much money you will receive in the future, but you can expect that it will be more than you initially invested.
When you make an investment, you do so because you expect the investment to grow in value, or to provide you with a regular income, or both.
Asset classes
Investors can generally choose to allocate their money to any of four types of investments, or asset classes. Two of these have defensive characteristics, which means that they provide guaranteed and virtually certain returns, but they do not provide you with opportunities for growth, or increase in the capital value of the investment. The other two types of asset have growth characteristics: they do not provide a guarantee of what your return will be, but they do offer the potential for capital growth. Each asset class therefore has unique advantages and disadvantages for the investor, and also unique characteristics and influences. Importantly, each type of investment also has a different ...
