Investing your money in places other than banks is a practical way of growing your wealth. Working eight hours a day will not give you a fortune when you get old. You’ll have a pension fund that will be enough for your retirement. Would you want more when you retire? If yes, investment companies, like Truebell Capital, can help you grow a fortune while you’re still young.
Thus, here are common investment concepts that you’ll most likely encounter when investing. You can work around these concepts with the help of a manager, like the one you will find at https://truebellcapital.com/.
If you want Truebell Capital to manage your investment portfolio, they’ll mostly interview you or let you answer a series of questions to determine your risk profile. A risk profile is your willingness and ability to assume risks related to investing.
In finance, there are three types of investors according to risk preference:
- Risk-averse — A risk-averse investor prefers investments that are not too risky to hold. The goal of a risk-averse investor is to preserve capital rather than receive higher returns.
- Risk-neutral — A risk-neutral investor doesn’t look at the risks involved, but rather look at the possible gains from investing. A risk-neutral investor aims for a positive margin.
- Risk-seeking — An investor who is risk-seeking prefers risk in exchange for higher returns. The risk-seeking investor plays with a chance in great volatilities and uncertainties.
Risk and return relationship
In investing, risk and return have a direct or proportional relationship. When you invest in a risky investment, there is an expected high return. But, the expectation of the return can be at a high gain or a steep loss.
Investment managers aim to reduce the risk of an investment by pooling these investments in these so-called investment portfolios. Let’s say you have AU$100,000. If an investment manager will invest 100 per cent of your money in one company, your investment absorbs 100 per cent of the risks. Check Truebell Capital for more details.
However, wise investment managers at Truebell Capital won’t do that. They will divide your money and invest it in different companies with different risks. Perhaps, they’ll invest 20 per cent of it in equity, 50 per cent in mutual funds, and 30 per cent in debt.
Return on investment
In financial analysis, return on investment (ROI) is the net gain or loss relative to the initial investment. The ROI can be expressed in this formula:
ROI = (Net Profit ÷ Cost of Investment) x 100%
Let’s say you bought 5,000 shares of common stock from Telstra Corporation selling at AU$3.74 per share. The cost of your investment would be AU$18,700. If Telstra paid dividends of AU$0.08 per share, your dividend income before tax would be AU$400 (5,000 shares x AUS$0.08.
The ROI would be:
ROI = (AU$400 ÷ AU$18,700) x 100%
ROI = 2.14% (rounded)
But, don’t worry. Investment managers, like Truebell Capital, will walk you through the whole investment process, especially if they know that you don’t have any background in finance. But, be a wise investor. Read about these concepts so that you’ll be more informed.
Visit https://truebellcapital.com/ to know more about investing.