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Frequent Questions Asked About Investing: Unpacking the Basics

In our blog post we unpack frequent questions asked about investing as we do get them often and we thought to provide you with some basic information with regards to investments and investing, how it works and how one makes money through investing.

Investing is the act of allocating money or resources to an asset with the expectation of generating income or profit. It typically involves purchasing assets that have the potential to increase in value over time, allowing investors to build wealth and achieve their financial objectives.

man holding a plastic house

2. How do I start Investing?

To start investing, you'll need to follow a few basic steps:

  • Set clear financial goals: Determine what you want to achieve through investing, whether it's saving for retirement, buying a house, or funding your children's education.

  • Educate yourself: Learn about different investment asset classes, portfolios and shares in order to better understand how investments work.

  • Assess your risk tolerance: Understand how much risk you're willing to take with your investments, as risk and potential returns are often correlated.

  • Open an investment account: Choose a brokerage firm or investment platform that suits your needs and allows you to buy and sell investments.

  • Start small: Begin with an amount you're comfortable investing and gradually increase as you become more confident and knowledgeable.

plants growing

3. How does investing work?

Investing involves putting your money into assets with the expectation of generating a profit in the future. You buy these assets, such as stocks, bonds, or real estate, with the hope that they will increase in value over time. The key is to make smart choices about where to put your money to achieve your financial goals.

4. How do investors make money?

Investors make money through various means, including:

  • Capital appreciation: When the value of their investments increases over time, investors can sell these assets at a higher price than what they paid, realizing a profit.

  • Dividends: Some investments, such as stocks, pay dividends, which are regular payments made to shareholders from a company's profits.

  • Interest: Bonds and other fixed-income investments pay interest to investors at regular intervals.

  • Rental income: Real estate investors earn money through rental payments from tenants.

To conclude:

Empowering yourself with literature is the best to gain knowledge about investing. There are a lot of reading material and audiobooks out there to give you insights on how investments work and are put together. Speak to an accredited financial planner about what your thoughts, goals and needs are and ask them to guide you.

Best wishes

Your Financial Planning Partner.


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