DRIP DICTIONARY

💰🌱An asset = Anything valuable that someone owns  like cash, stocks, or property.

Blockchain is the technology behind crypto. 🪙

It is a database that records all crypto transactions 🔗

Bond = a type of loan to companies or government usually in exchange for regular payments with interest 💵

Some bonds, like government bonds, are typically low risk: you know exactly how much you will get back. 👌

But they can also be low reward: your money may grow slower. 🐢

Bonds are not all low risk - particularly property development bonds or resource bonds.

Commodity = physical good that can be traded, bought, or sold 🏬

Think oil, gold, corn.🛢️🌽💰

Many commodities can be traded in the market – known as exchange-traded commodities.

Their prices swing based on factors like weather and political events. 🌧️🌪️

Compound interest is earning interest on your interest.

It’s like a superpower that means money can build and build over time⏳

Here's how it works:

1. First Year: You start with $100. You earn 10% interest on $100, which is $10. So at the end of the first year, you have $110.
2. Second Year: Now, instead of just earning interest on your initial $100, you earn interest on $110. So, 10% of $110 is $11. At the end of the second year, you have $121.
3. Third Year: In the third year, you earn interest on $121. So, 10% of $121 is $12.10. At the end of the third year, you have $133.10.

Cryptocurrency is a digital asset that sits on the blockchain and can be a form of digital money 📲

It allows people to make payments directly to each other through an online system.

Unlike national currencies, cryptocurrencies are not legislated by governments. They are worth whatever people are willing to pay for them in the market 🚦

There are several cryptocurrencies – the most well-known of these are Bitcoin and Ether.

The famous “don’t put all your eggs in one basket.” This strategy involves spreading your money among various investments

It can be used by investors as a strategy to reduce risk: if one investment loses money, the others could make up for it.

For diversification to work, the investments must different to each other to make sure they don’t go down at the same time.

A share of a company's profits paid to its shareholders.

Companies can choose to share part of their profits between all owners 💸

💡ETFs = Exchange-Traded Funds

Think of an ETF as a pre-made shopping basket.

But instead of snacks, it's filled with a variety of investments, such as shares.

And you can purchase this whole basket as one item.

‍

Examples:

🦘 A200: 200 largest companies in Australia

📱 TECH: promising companies in technology

🟡 EBTC: Bitcoin stored by Coinbase

‍

Fun facts about ETFs!

👉🏻 type of investment fund that is traded on an exchange

🛒are baskets of investments traded as one

🏦 can contain many different companies

🌽 can have many types of assets, like shares, commodities, or bonds

🕵🏻are managed by professionals

The total value of a company's shares.  

It is one way to value a company, by multiplying the price of one share by the number of shares it has.

The price going up and down is what we call market fluctuations, or volatility.

They are quite common and do not need to result in actual loss (unless you sell at the wrong time).

A collection of financial investments. It can include stocks, bonds, commodities, cash, and anything else an investor owns.

Real estate = land and any building or property on it.

It can be the house you’re living in or your parent’s office. 🏠

Investors can make money when they sell the property at a higher price to what they paid for it, or when they rent out the property to tenants (or using AirBnB). 💰

It can also have risks, costs and tax implications quite different from shares.  

Here are some examples:

- Tenant may leave or not pay rent

- You may need to borrow money to buy the property (and pay interest)

- Property may require maintenance or additional money

- Property may be damaged

- All fixed structures depreciate over time

This way, real estate can provide a steady income, but it's always important to remember the risks and that it usually requires a lots of money upfront 🏡

Return is how much you make or lose from your investments.

Imagine you buy something, and its price goes up: that's a positive return – if you sell it, you make money 📈

Now if the price goes down and you sell it, that's a negative return – you lost money.

👉🏼 Risk = how much you could potentially lose on an investment & the likelihood of this happening

Different investments have different levels of risk. ⛷

A share is a slice of ownership in a company🍕

When you buy a share, you’re buying a small piece of a real company, becoming part-owner of the company.

Just like anything you buy, a share has a price. It represents the value of a single “slice”.🌱

Share prices can go up and down every day, so the value of your investment can also change every day…

Sometimes by a lot! 👀

A place where an investor can buy and sell stocks 💱

A unit is a part ownership of an investment vehicle, such as an investment fund.

Imagine an investment fund like a jar of cookies: you get a cookie for each unit you own 🍪

The  more money you invest, the more cookies you get.