Diversification is the practice of spreading your investment portfolio across different types of assets, such as stocks, bonds, and real estate. It helps to reduce overall risk by minimising the impact of any single investment on your portfolio
Risk tolerance is your ability and willingness to accept risk in your investments. It's important to understand your risk tolerance before investing, as it will help you choose investments that align with your goals and comfort level
Asset allocation refers to the proportion of your portfolio that is invested in different types of assets, such as stocks, bonds, and cash. The right asset allocation depends on your investment goals, risk tolerance, and time horizon
ROI, or return on investment, is a measure of the profit or loss generated by an investment over a certain period of time. It's calculated by dividing the investment's net profit by its cost
Mutual funds are investment vehicles that pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. They offer a convenient way to invest in a variety of assets and are managed by professional fund managers
Index funds are a type of mutual fund that tracks a specific stock market index, such as the S&P 500. They offer low fees and diversification across a broad range of stocks.
ETFs, or exchange-traded funds, are similar to index funds but trade like individual stocks. They offer the benefits of diversification and low fees but are more flexible and tradable than traditional mutual funds
Dividends are payments made by a company to its shareholders as a portion of the company's profits. They can provide a source of regular income for investors and are often paid by companies with a stable financial history
Capital gains are profits made from selling an investment for more than its original purchase price. They are subject to capital gains taxes and can be short-term or long-term depending on the length of time the investment was held
Volatility refers to the degree of variation of an investment's price over time. It's important to understand the volatility of an investment before investing, as high volatility can mean high risk but also high potential returns