Investments Basics – Risk, Reward & Liquidity

Hi All,

Youtube is full of junky personal finance advice.  So, when I came across this quick video on the basics of personal finance, I thought I’d go ahead and republish it here on Engineer. It’s unique and interesting because it outlines some personal finance basics, but also shows how you should take the investments basics and implement them into a viable asset allocation scheme – an investment risk pyramid.

Since not everyone has access to youtube, the highlights are summarized below. Most of these are pretty simple, but once you master the basics your capacity to understand how wealth building is done is greatly improved.

1. Consider risk, return and liquidity when making asset allocation decisions

2. Use the rule of 72 to determine how often your money doubles

3. Understand that all investments carry some type of risk

4. Volatility is part of investing, prices will rise and fall

5. When you buy a stock, you become an owner

6. When you buy a bond, you become a lender