Asset allocation – This is about deciding what proportions to allocate to different asset classes within your investment portfolio to balance risk and return, in keeping with your goals, risk appetite and investment horizon.

Capital – The sum of money you are investing with.

Capital gain or loss – The amount you make or lose when you sell an asset.

Diversification – Diversification is about mixing a variety of investments in your portfolio to achieve your desired risk-return profile. You can diversify your portfolio across different asset classes like shares or bonds, different markets like domestic, regional or global markets, or across different economic sectors and industries.

Peso-cost averaging – This involves investing a fixed sum of money at regular intervals, regardless of whether the market is up or down.

Investment horizon – The amount of time you have to invest to achieve your financial goals. If you have a longer investment horizon, it means that you have more time to stay invested to ride out short-term fluctuations. The longer your investment horizon, the more time you also have to grow your savings through compounding.

Investment income – This is income that you earn from your investment. It could be dividend payment from shares or mutual funds, or the coupon received from a bond.

Return – The gain or loss made from an investment. It can be income earned from a product, or the capital gain or loss (price gain or loss) on the product.

Risk – The likelihood that the return from an investment may be less than you expected. Investment risk can refer to:

  • Lower than expected returns, for example, due to share price volatility or the underperformance of a fund
  • The possibility of losing the money invested, e.g. when a bond issuer defaults on interest or principal payments. In some cases, you may lose all of the money you invested.

All investments come with the risk of losing money. Always know the maximum you can lose.

Liquidity – How easily or quickly an investment can be converted to cash. For example, shares can be typically bought and sold more quickly than property, which usually requires a significantly longer time to convert to cash.

Market timing – Buying or selling a shares when you think the market is favourable for you.

Net returns – The amount earned from a product less any losses and fees. Transaction costs such as sales charges, brokerage charges, and manager fees will reduce the returns to you.

Portfolio – The pool of investments you own.

If you want to learn the basics of financial planning and how to get into the financial market safely; join us this Saturday @ gateway hotel 9th Nov 2019 – 1pm -5pm – REGISTER HERE

Article by: Ashok MBA – Strategic Coach & Mentor for MDRT/COT/TOT


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