Topic 03 · 3 min read

Understanding how investing works

1. In the most straightforward sense, investing works when you buy an asset at a low price and sell it at a higher price. This kind of return on your investment is called a capital gain.
2. When an investment gains in value between when you buy it and you sell it, it’s also known as appreciation.
3. There are various types of investments options such as
   • Stocks
   • Real Estate
   • Gold
4. The basic idea is:
   • You start with money.
   • You buy an asset (stocks, bonds, real estate, mutual funds, gold, etc.).
   • That asset may:
     • increase in value, or
     • pay you income (dividends, interest, rent).
   • Over time, your money can compound and grow.