I talk a lot about dividing your money into 4 categories: SAVE – SPEND – DONATE – INVEST. Investing means using your money to buy something that can make you money when you sell it. You can use your money to buy stocks, bonds, real estate, collectables and more. It is important to remember that in real life, before someone can invest money, they must make sure they are saving enough money to meet their daily, weekly and monthly expenses. Below are a few definitions to help you start learning about investing:
- Investor: Someone who uses their own money in order to make more money in return.
- Interest: Payment in exchange for the use of money over time. For example, you can earn money (interest) by lending your money to a bank. In addition, you pay money (interest) when you borrow money from a bank.
- Stock: A unit of ownership in a company. The value of a stock goes up or down depending on investors guessing about future profits.
- Bond: A contract between an investor and the US Government or agency. The investor agrees to lend money to the government for a set period of time in exchange for interest.
- New York Stock Exchange: The busiest stock exchange, representing more than 3000 companies where millions of stock shares are traded every business day.
- Dow Jones Industrial Average (DJIA): 30 Stocks listed on the New York Stock Exchange. The Dow is used a scorecard to show average stock performance for each trading day.
- Diversification & Asset Allocation: How money is divided up between different types of investments.
