LecturerGood morning. Today I'll survey the main places people put their money, and the one principle that links them all: the balance between safety and reward.
LecturerThe single most important idea in investing is the trade-off between risk and return. As a rule, the higher the potential return, the higher the risk you must be willing to accept.
LecturerAt the safe end sits cash — simply money in a savings account. It almost never falls in value, but it offers the lowest return of all.
LecturerA step up from that is a bond. When you buy one, you are essentially lending money to a government or a large company, which pays you interest in return.
LecturerRiskier still are shares. Buying a share means owning a tiny slice of a company and sharing in its fortunes. Historically, shares have returned about seven per cent a year on average.
LecturerThen there is property. Houses and flats earn money in two ways: the rent they bring in, and the rising value of the building itself over time.
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