module 2
investing 101
There are two types of investing - Passive & Active. Passive investing is a strategy centred on buying and holding assets for the long term (such as retirement). Active investing involves actively buying and selling assets in the hope of making profits. Studies show that passive investors beat active investors in the long-term 95% of the time. This involves ‘stock-picking’ (a very risky form of investing). We’ll also discuss the main difference between the terms ‘investing’ and ‘saving’ and why they cannot be used interchangeably.
module summary
Active investing is a strategy where the investor actively buys and sells individual securities in an attempt to outperform the broader market. This is in contrast to passive investing, which involves investing in a diverse range of securities and holding them for the long term, without attempting to time the market or pick individual winners. Active investors typically have a strong conviction about which securities will perform well and will make investment decisions based on their own analysis and research. This approach can potentially lead to higher returns, but it also carries a higher level of risk and requires a significant amount of time and effort to manage.
Passive investing is a strategy where the investor invests in a diversified portfolio of securities and holds them for the long term, without attempting to time the market or pick individual winners. This is in contrast to active investing, where the investor actively buys and sells individual securities in an attempt to outperform the market. Passive investors typically use index funds, which track a specific market index, such as the S&P 500, and provide a low-cost way to invest in a broad range of stocks or other securities. This approach can provide a good balance of risk and reward, and it requires much less time and effort to manage than active investing.
Saving and investing are both important for your financial well-being, but they serve different purposes. Saving refers to setting aside money for short-term goals or emergencies while investing refers to using your money to generate a return over the long term. Savings are typically kept in low-risk, liquid accounts, such as savings accounts or money market accounts, and are easily accessible when you need them. Investments, on the other hand, are typically put into higher-risk, higher-return assets, such as stocks, bonds, or real estate, and are intended to grow your wealth over the long term. It's important to have a balance of both saving and investing in order to achieve your financial goals.
