When it comes to financial matters, it can take years to pick up the lingo enough to understand what people are talking about. Of course, this means that you can be left in a rut. Or, you could solve the problem by taking some classes or teaching yourself. That’s time-consuming and hard, though. So, here’s a cheat sheet for you. These terms will surround various aspects of investment.
When investing in property, you may hear people talk about mortgages. A mortgage is a loan that’s used to purchase property. A bank gives the mortgage, based on how much somebody earns, and they charge some interest on it when repayments are made. A mortgage will always require some sort of deposit or down payment.
- Personal Loan
Sometimes, when making a large investment, someone may have to take out a personal loan. A personal loan is similar to a mortgage in the sense that the money is borrowed and paid back with some interest. But, it’s different because the receiver doesn’t need to provide a deposit or down payment. For both personal loans and mortgages, you’ll find loads of deals. But, some are better than others. To understand these different types of loan, take a look at sites like Lending Tree.
- Interest Rate
An interest rate is a percentage rate that is to be paid, based on how long money has been held. A lot of investments involve getting a return from interest, so it’s quite important. When you give someone money to invest for you, like a bank, they will give you some of the return that they make. And, when you borrow money, you have to pay interest on it.
Return is the money that you make from an investment. Usually, this will include the money that was initially invested, as well as the money that has been gained. It’s very important that an investment makes a positive return. Otherwise, it was a waste of money. Generally, the higher the risk tied to an investment, the higher the return will be.
As an investment matures, it should grow. This means that it’s value has gone up, and the investment has been successful. Growth of investments is usually shown as a year-long chart and is calculated as a percentage. For example, if you invest $100 and after a year you have $120, your investment has grown by 20%. Of course, this is a huge margin, and growth is usually much smaller.
When investing money, there’s almost always some sort of risk. But, without risk, there’s no reward. So, for a lot of people, the risk is worth it. Most of the time, you can choose an investment that doesn’t involve many risks. These investments are usually done through banks or other organisations, who have the power to insure your investment.
When making investments, some people prefer to make sure that their money is as secure as possible. One of the safest ways to do this is with a bank, of course. And, banks know this, having created a way for you to invest through them. A bond is similar to savings account. But, your money is held in the bond for a set amount of time. Once the bond matures, you have access to the investment again. You get the interest rate from the start, so you know how much you’ll make. And, the bond will be insured by the bank. So, even if they lose your money, you’ll still get it back.
- Stocks and Shares
When a company gets large enough, it will usually start selling off small chunks of itself. Or, when it first started, it had investors already. Stocks and shares are the result of this, and they can be bought quite easily. Usually, a broker will be used. But, other than that, they can be bought by anyone. And, when they go right, they’re a valuable investment. Shares and stocks go up and down in price. So, if they’re bought in a low, selling them in a high could see great results.
Typically, large investments are handled through an agent or broker. They arrange the agreement between the two parties and make sure that everything goes to plan. These are most commonly found in property transactions. You could even consider the real estate agent to be a sort of gateway. But, you are more likely to find them in transactions where businesses are heavily involved.
- Peer-to-Peer Lending
When it comes to business, there’s always someone who needs some money. Whether it’s to open a shop or buy land, someone will be there to provide it. More and more frequently, these loans are being provided by groups of people. This sort of lending is known as peer-to-peer lending, as the money comes from civilians. These loans are quite secure for the investors because they don’t usually put much in. And, it’s good for the business, because they don’t have to go through a bank.
Of course, investing is a very complex area. It’s important to understand exactly what you’re putting your money into before you do it. And, it’s also worth considering the risk. In some cases, you can be risking all of your money in an investment. The risk level may not be that high, but are you still willing to take the risk? The law and rules are different everywhere. This means that some of these terms may be different where you are. So, it’s important to do as much research as you can before taking on something like this. You can always talk to your government or bank for advice about investment.
Hopefully, this will inspire you to start a life of investment. It can be hard to get into something you don’t understand. But, with a bit of time and dedication, you’ll be happy with the results. Investing early is very useful to anyone. Having mon