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What to know about Investing 

-Some terms that you should be familiar:

  • Interest → Money that a bank or other financial institution pays you for holding your money with the bank

 

  • Compound Interest → This is interest that includes the money you have saved as well as the interest that you’ve earned already

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  • Stock →Portion or share of a corporation that can be brought by investors at a certain price

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  • Mutual Funds → Pools money from different investors to buy stocks of different companies, however it’s only a portion of the stock 

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  • Bonds → Issued by the government or corporations as a way to raise money. You can purchase a bond and the issuer has to pay you back at a later date. Think of it like a loan where they need to pay you back with interest. 

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-Rule of 72

  • One of the basic rules of investing is the Rule of 72. It’s a formula that calculates the number of years it will take to double your investment. 

  • t  → The number of periods or time it takes for the investment value to double

  • r  → interest rate per period

 

Stocks

  • A stock is a portion or share of a corporation that can be brought by investors at a certain price

  • A Stock Market is where stocks are listed on a stock exchange and brings buyers and sellers together. 

  • Stock Exchange → Exchange where stockbrokers and traders can buy and sell stocks

     The Stock Market can be affected by external factors such as war and supply and demand 

 

Investment Strategies

Dollar Cost Averaging (DCA)

  • Making regular investments in the market for a period of time

  • 3 parameters that should be considered

    • The total amount being invested

    • The time period when the investments are being made

    • The frequency of investments

  • Less risk

    • Avoids Market timing

      • Buys stocks at low and high prices

      • Committed to investing

        • Can’t make rash decisions as it’s an automated process

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Momentum Investing

  • Momentum Investors buy and sell based on the stock price.

  • Investors buy stocks when the stock is experiencing growth. 

  • They use data in order to find patterns to dictate what stocks they should buy.

  • Usually when stock prices drop, they tend to sell their stock

  • Can be profitable but risks are present

    • Fees associated with constantly selling and buying stocks

 

Investment Strategies Continued

Value Investing 

  • Investors are interested in finding a bargain in an undervalued stock

  • About researching the business not just the stock

  • Long term commitment

  • Use the price-earnings ratio (p/e)

    • Identifies undervalued stocks

    • Undervalued stocks have a less than 1 ratio

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Growth Investing

  • Investors are interested in investments that have potential in the future

  • Consider the prospects of industries when choosing the stock to invest in

    • Research how the industry of the stock will grow

    • Research the health of the market itself

 

Sustainable Finance

Considering the social, environmental and governance(ESG) criteria when making an investment

As known as green finance, focuses on the environmental impact on investments

  • Promoting clean/ renewable energy

    • Wind, solar and water

  • Reducing Pollution and Carbon Footprint

Benefits

  • Competitive Advantage - Gain customers that are environmentally conscious

  • Brand image - Brands that support/practice sustainable business practices look better than others who don’t

  • Employee engagement - Businesses that have a positive impact on the environment are more appealing to possible employees

  • Customer Loyalty - Customers are more likely to be loyal to companies that are committed to practicing green financing 

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