Shares/Stocks/Equities

A share is an investment in a company. It is a share in the fortunes of the company (good or bad). Sometimes called an equity, it is literally a share in the business.

As a shareholder, you will get a share in the profits of the company (sometimes called a dividend). If the business is doing well, the share price may rise, in which case the value of your investment will rise. On the other hand, if the business is not doing so well, the share price will likely fall, meaning a fall in the value of your investment.

Bonds

A bond is a loan to a company or government. It is often for a set term. At the end of this term you will get back your loan provided that the company or government is still in business.

In return for your loan, you are paid interest, sometimes called “coupons”. The coupon will depend on several factors:

  • How long you make the loan for (ie the period to when you get your money back)
  • How risky the company or government is thought to be (ie how much risk is there that you the company or government might not be in business by the time your money is due to be repaid)

Typically, the longer the period of the loan, and the riskier the company/government is, the higher the interest or coupon. In other words, to reward you for the greater risk you are taking with your money, you receive a higher interest payment.

As a bondholder, you will not get a share in the profits of the company (as you would if you were a shareholder), but you are not as exposed to losses as a shareholder is, provided the company/government does not completely fail.

You can still lose money on bonds as the price of your bond does go up and down depending on the factors mentioned already.

Property

Investment in property can take several forms, as listed below.

Like any asset class, it is important to be aware of the upside and the downside and not have an over concentration in one asset class.