Investing foundations
Deciding whether money is available to invest
A bank balance can include money already committed to bills, reserves and near-term plans. Separate those jobs before considering investment risk.
Investing foundations
Understand ownership, risk and the mechanics behind an investment.
30 articles
Investing foundations
Matching an investment horizon to a goal
A goal has more than a target date. The first withdrawal, flexibility and consequences of a shortfall all shape its investment horizon.
Investing foundations
Risk tolerance and capacity for loss
Feeling comfortable with market movements and being able to absorb a financial loss are related questions, but they are not interchangeable.
Investing foundations
What owning a share actually means
A share is an ownership interest with rights and risks. It is not a promise that the company will return your purchase price.
Investing foundations
Understanding a bond before comparing yields
A bond yield is a summary of assumptions. The issuer, payment terms, purchase price and repayment conditions explain what stands behind the number.
Investing foundations
How an investment fund pools money
A fund combines investors’ money into a portfolio. Understanding the units you own and the assets behind them helps separate the fund from its marketing label.
Investing foundations
An ETF is a wrapper, not a risk rating
Exchange trading describes how a fund is bought and sold. Its holdings and strategy determine much of the risk an investor is taking.
Investing foundations
Reading an index fund description
An index fund follows a defined market measure. The index’s selection and weighting rules are part of the investment, not background detail.
Investing foundations
Diversification beyond counting fund names
Diversification is about different underlying exposures. Several account names or fund labels may still leave much of the money tied to the same source of risk.
Investing foundations
Recognising overlapping fund holdings
A look-through calculation can reveal exposure to the same company in several funds. Keep the valuation dates and the limits of the data beside the result.
Investing foundations
Understanding asset allocation without a model portfolio
An allocation describes how money is divided among exposures. Learning the arithmetic is useful without treating an example as a portfolio recommendation.
Investing foundations
What rebalancing changes in a portfolio
Rebalancing changes the proportions of existing investments. It is a decision about an agreed allocation, with costs and practical limits to check.
Investing foundations
Regular investing and market timing
Regular contributions impose a schedule on investing. Their arithmetic differs from predicting which day will offer the lowest price.
Investing foundations
Small contributions and fixed dealing costs
A fixed dealing charge takes a different proportion of a small purchase than a large one. Work through the actual order pattern before comparing providers.
Investing foundations
Fractional shares: questions to ask a provider
Buying less than one share can make precise cash amounts investable. Provider rules still determine how the fraction is traded, held and transferred.
Investing foundations
Price changes and total return
A price chart leaves out cash paid to investors. Total return brings income and value changes into the same calculation.
Investing foundations
Dividends are part of an investment return
A dividend is cash distributed to shareholders. Its arrival should be considered alongside the investment’s changing value and the terms of the payment.
Investing foundations
Accumulation and distribution fund units
Income and accumulation share classes handle fund distributions differently. Compare the same underlying strategy before attributing differences to performance.
Investing foundations
Unrealised gains and money you can spend
A higher account valuation is not the same as cash ready to withdraw. Separate the market value, the sale and the movement of proceeds.
Investing foundations
Liquidity when an investment is hard to sell
Liquidity concerns whether an asset can be turned into cash when needed and on what terms. A valuation shown on screen may not be an available sale price.
Investing foundations
Currency exposure in an overseas investment
An overseas investment can change in both its local value and its value in your spending currency. The two movements combine rather than simply adding.
Investing foundations
Why past performance is not a forecast
A historical result describes one set of prices, dates and conditions. It cannot establish what the next investor will earn.
Investing foundations
Volatility and permanent loss are different
Price variability and the possibility of an unrecoverable loss describe different problems. Neither can be understood from a single smooth-looking chart.
Investing foundations
Understanding a fund benchmark
A benchmark supplies a comparison, but its coverage, currency and return definition determine what the comparison can show.
Investing foundations
Concentration risk in a favourite company
Familiarity with a company can obscure how much of a portfolio depends on it. Measure the combined exposure before judging its significance.
Investing foundations
Employer shares and household concentration
Employer shares can connect employment income and investment value to the same business. The first step is to distinguish what is owned, vested and actually available.
Investing foundations
Market orders and limit orders in context
Market and limit orders express different priorities. Neither instruction removes price uncertainty, execution uncertainty or the need to check the result.
Investing foundations
Investment settlement is not always immediate
The trade date, settlement date and withdrawal date can be different. A sale should not be treated as an immediate bank transfer.
Investing foundations
Keeping an investment decision journal
A decision journal preserves what was known at the time. Its value comes from separating the original reasoning from the story told after prices move.
Investing foundations
Writing a first investment policy note
A personal investment policy note describes purpose, limits and review triggers. It can remain useful without pretending to be a complete financial plan.