Investing is normally a topic that conjures up images of pin-striped executives and sophisticated financial markets. In reality, the act of investing is part of our daily lives; all of us are doing it throughout the day, though we might not consciously stop to think about it.
By exercising and pursuing good eating habits, we invest in our health; taking good care of our families and looking out for friends is an investment in our relationships, and commitment to education is an investment in our future. These are but a few examples and many more can be found. The point is that – as a way of life – we consistently invest time, effort, and other resources, in matters that are important to us.
The largest investment for most of us is the countless hours spent on earning a living; a substantial part of our life is absorbed by working to make ends meet. Consider this basic truth: there are only two ways to earn a living – you must work for your money, or your money must work for you.
Our money must work hard for us so that we can comfortably maintain our quality of life.
So how does your savvy about financial investing stack up right now? Try this quick quiz to find out.
How would you describe an asset?
Is investment income taxed?
What is meant by “bull market”?
What is a managed fund?
What is a share?
Which is a riskier investment – property or term deposit?
What is a dividend?
What is negative gearing?
How would you describe an asset?
Investments, such as shares – are called assets because they are valuable and are intended to make our money grow. Physical items that can be put to good use –such as machinery – are also called assets because they may fulfil important roles; for instance, to manufacture consumer products.
Is investment income taxed?
Investment income is taxable. An example is the interest that you receive on funds held with banks and financial institutions.
What is meant by “bull market”?
When financial markets are upbeat and optimistic it’s referred to as a bull market. The opposite, when a market is pessimistic, is called a bear market.
What is a managed fund?
Managed funds are vast amounts of money, made up of the contributions of many individuals placed together. The funds are invested in various assets and managed by experienced and skilled professionals.
What is a share?
Companies raise the money that they need for their operations – also called capital – by selling shares. The people and legal entities who have bought into a company are called shareholders. They have the right to vote on company matters and to receive a portion of their profits.
Which is a riskier investment – property or term deposit?
The return on your term deposit is guaranteed by the financial institution, whereas property investment returns fluctuate in line with property market values. The value of a property can swing significantly and even fall.
What is a dividend?
The directors of a company decide each year how much of its profit can go to the shareholders and how much should be held for the ongoing operations of the business. The portion of the profit that gets paid out to the shareholders is called a dividend.
What is negative gearing?
An example of negative gearing is through the property. An investor usually finances a rental property through a mortgage. The mortgage interest and property maintenance costs are offset against the rental income. If these costs exceed the income, the property is negatively geared. In usual circumstances, one benefit of negative gearing is claiming tax deductions for the costs during the life of the loan. This practice should only be attempted in a rising property market.
So, how did you go?
Although it can be complicated, the financial markets can offer a great opportunity to make our money work hard for us. Sensible investments can mean the difference between reaching our financial goals, or not.
If the quiz shows that your own investment knowledge needs some work, we can help.
Financial advisers are qualified and licensed professionals who stay in touch with the fast-moving financial world and can provide solid guidance across all types of investing.
Contact us to see how investing can help you on the way to reaching your own financial objectives.
https://en.oxforddictionaries.com/definition/asset
https://www.investopedia.com/terms/b/bullmarket.asp
https://www.moneysmart.gov.au/investing/managed-funds
https://financial-dictionary.thefreedictionary.com/share
The purpose of this website is to provide general information only and the contents of this website do not purport to provide personal financial advice. Denaro Wealth strongly recommends that investors consult a financial adviser prior to making any investment decision. The contents of the Denaro Wealth website does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions. The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.