7.2 About investments

In this section:

• 7.2.1 Investment characteristics: return
• 7.2.2 Investment characteristics: risk
• 7.2.3 Investment characteristics: liquidity
• 7.2.4 Risk and your risk tolerance
• 7.2.5 Diversification
• 7.2.6 Investing strategies
• 7.2.7 Summary of key messages

Introduction

The investments available even to a beginner are sometimes very complex. The language used to describe them is unfamiliar to many people. However, understanding some key factors and terms will help you tell what the investment is about and whether a specific investment is a good choice for you. This section describes how to compare the most common types of investments.

You will explore:

• the main characteristics of an investment: its return, risk and liquidity
• the importance of diversification in choosing investments.

You'll review the way investments are described and evaluated. You'll look at some typical mixes of investments and analyze how appropriate they are. By the time you finish this section, you'll know how to describe investments in broad terms and decide what types of investments are suitable for you.