Investing has an image problem. Say the word ‘investors’ and I picture finance bros in suits sitting at the Baron in Sandton yakking about the price of the latest obscure cryptocurrency and comparing photos of their BMWs.
The truth is, all of us need to invest. Investing isn’t just a thing you have to learn how to do if you’d like to upgrade your yacht to a bigger yacht. It’s what can help you to preserve the value of your hard-earned savings over time, against inflation, to make sure that you’ll have enough money to see you through your retirement. It’s about security for yourself and your family. It’s something all of us who manage money need to get more comfortable with.
Here’s the good news: investing is really far less complicated than the financial services industry makes it look.
INVESTING MEANS BUYING ASSETS
At its heart, investing just means buying assets. Assets are things that make money for you over time, either by increasing in value (so you can sell them for a profit) or by directly producing an income.
Let’s consider a concrete type of asset: a cow. There are two ways in which owning a cow can make you money:
Option one, you can buy a calf when it’s young and cute, nurture it until it’s a hefty bovine unit and then sell it for a profit. In the world of investing, this is called a capital gain.
Option two, you can choose to keep the cow and milk it regularly, thus generating a consistent stream of income while you own it. If you had company shares instead of a cow, we would refer to the profits as dividends from the shares.
Esta historia es de la edición July/August 2023 de Fairlady.
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Esta historia es de la edición July/August 2023 de Fairlady.
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