Investing 101: Asset Classes (Stocks, Bonds, REITs, Mutual Funds, Commodities etc.) | Gideon T | Skillshare

Investing 101: Asset Classes (Stocks, Bonds, REITs, Mutual Funds, Commodities etc.)

Gideon T

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10 Lessons (58m)
    • 1. Overview

      1:35
    • 2. Stocks & Shares (Introduction)

      5:36
    • 3. Stocks & Shares (Types)

      7:47
    • 4. Fixed Income

      9:00
    • 5. REITs

      8:26
    • 6. Mutual Funds

      6:11
    • 7. Commodities

      2:15
    • 8. Derivatives

      6:05
    • 9. Cryptocurrencies & Tokens

      5:13
    • 10. Recap & Project

      5:29

About This Class

What can I invest in? This course introduces you to a range of asset classes: stocks, bonds, REITs, mutual funds, commodities etc. Understand what they are, how they work, their subtypes (eg. growth vs value stocks; corporate vs government bonds) and how to fit them into your investment portfolio. Whether you are a beginner investor or someone interested in learning about asset classes you are unfamiliar with, this course equips you with the fundamentals to answer the opening question “What can I invest in?”

  1. Stocks & Shares
  2. Fixed Income (Bonds)
  3. Real Estate Investment Trusts (REITs)
  4. Mutual Funds
  5. Commodities
  6. Derivatives
  7. Cryptocurrencies & Tokens

*More interested in short-term trading? Check out the course: Trading 101: Forex, Stocks, ETFs & Strategies

*Learn Technical Analysis for investing in this course: Technical Analysis 101: Indicators, Patterns, Strategy for Trading & Investing

*Learn how to determine value and prices of assets: Investing 101: The Math of Valuing Stocks, Bonds, Option, Futures

Transcripts

1. Overview: Hi, everyone. Welcome to re investing 11 Asset classes course in its cost, will be covering a variety off asset classes with are basically investment vehicles, which you can use to grow your wealth. I'm over time. So in this costume, be covering covering the following asset classes, stocks and shares Fixing cameras on its bonds are real estate investment trust or REIT initial funds, commodities derivatives, as well as an unusual asset class called cryptocurrencies and bookings. And I'll find you end over the weekend in a passport checked and the lesson I will also cover a bit on portfolio management and how you can, uh, youth all the knowledge you've gained from this cost. So as Molly, these courses are meant for basic financial literacy. To understand how all these I said classes what what do you are and some points to consider before investing in them. Ultimately, this course is about investing, which looks into a long term going off your wealth, letting your money work for you and increase Bt inflation because ultimately, if you put your money in the bank account, which has low interest rates over time, your real of the real value of mine. Your money actually shrinks. I do to affect us that inflation. So I hope you really enjoy this Costs, um, and hope he could issue of the basic knowledge necessary to start on the investing Jenny. 2. Stocks & Shares (Introduction): everyone. So for the first asset class were covering will be talking about the most common is that class, which is stocks and shares. So what? I start insurance stocks and shares actually represent ownership off part of company and actually give you voting rights when your own. When you need some amount off vote, you have essentially proportionate to the number off shares your own and also depends on the shape pipe. So they are two types off. There can be multiple share classes, but most commonly do have two types. Cassie and be We're for seven class having more voting rights, po share and the class off shares I usually reserved for the inner circle off the founders and early employees off company. So with this shares, you can excite or voting rights and or general meetings where you can elect bought members and influence decisions made by a company. So how do you earn money from stocks and shares so you can get you from stops insurance by two minutes? Firstly, you get it from an increase in share price. So so you buy a share. $10 is price increases of $20 you sell it, then you'll make a profit off. Uh, $10 Boucher Another. The second way of making money from shares is true dividends. Um, since your own your own part of the company, the company sometimes distribute part of their profits to shareholders, although this is not required off the company and a company can choose not to give the villains. Uh, and you can choose not to distribute their profits. So a share price times number of shares that the company has would be closed toe the market capitalization, just the total valuation off the company. Yeah, So this I'll give you a good idea of what stocks and shares up so you can own shares in both private and public companies. What was the difference? So other companies are not listed in public exchanges yet? Uh, exchangers. So that would mean that we haven't undergone in an initial public offering. Soto only shares only Michelle's is not really available to the public, and top 10 damn usually have to You really have to invest in in this private businesses. True funding rounds, and you can do so in a capacity often individuals and enjoy investor. But usually such injury investors and or institutional investors who invested private companies are also expected to provide guidance rather than just money to these private companies. Help them grew. Of course, there will be a difference, which is in a partnership where you can be a silent partner and you just give some money to a fellow partners to run the company and in return for some amount of shares. So how we are chairs in private companies have you on money. Big shots and private companies are not very liquid, meaning that it is quite hard to sell them because you can sell the share to anyone on the streets. You can't saw shares to the public without, um, first without the agreement off other shareholders within the company and you really for. But if you hope private shares, you're usually hold the shares up to a point way. That's a potential exit, and this exit can be in the form of an acquisition. See the say you're only shares in company. A private company and company be acquires or buys over the company and office system off cash, and you can get a cash depending on amount of shares of company. You on another exit, its initial public offering, where the private company turns public and in that Keyes the shares. You can sell your shares to the general public after the IAP you. The share value is really dependent on private companies dependent on the company's valuation, which is dependent on the intent, depending on the year. The how much the investors who doing the funding rounds value the company now for shares in public companies chasing probably companies can be easily bought and salt on public exchanges, but it's important one company can be listed in multiple exchanges in different countries. But uh is mostly the case where one company is only Lister in one exchange, and because public companies are listed on exchanges their shares, how much more equipment can easily sell them off? Uh, and so to obtain public shares of public companies, you can either purchase them in the stock exchange or you can an employee of the company. And it's quite often the keys where toe a line defend interest within the company, become a company's, sometimes choose to give certain amount of shares to their employees as a reward for performance or for spending a long period of time. It's a loyal employee in the company 3. Stocks & Shares (Types): so now recovering various types of stocks. So the Fed stops. I'm gonna pulverize growth stocks. The growth stocks are stocks off rapidly growing companies that have rapidly increasing revenues and earnings relative to other comparable companies in the industry. And such companies have strong growth potential. So not only do they ever good track part of rapid growth, it is. So project continue to grow very strongly future. Yes. So growth stocks usually generally have smaller diffidence as the reinvestments off their profits and earnings back into the company to help the company grow. And even more rapidly, this would mean that they wouldn't really distributed profits much among the shareholders. But we just think the profits and Reinvestment company have a company group. We'll start with yes, have higher price to book ratio. Uh, possible ratio is the stock price divided by the book value per share and book values. The total assets minus liabilities. So what sort of price? Double re shore actually shows, uh, how much than you e share she gives you for the amount of U P. For a shape. So go stocks have high price herbal ratios because investors see for see are these companies is having strong growth potential and the past foresee that their future share prices who continue increase in the future. Do you have a capacity to give a large diffidence once the company matures? And because of that, the share price can be quite high compared who, the intrinsic value or the revenues of the company? Uh, similarly ghost actually have higher price to earnings ratio off for similar reasons. Personal earnings ratio is the share price. Rachel the share price to the earnings of the company. So an example off a growth stock will be Amazon is early years, although, yes, it had huge revenues. It, uh, for example, it took love his profits from its, um, e commerce business and reinvested it toe other religions. Other businesses, such as its card business, is our website services. It was just happens on grew rapidly. Yeah, So in contrast to golf stocks, we had value stocks. So very stocks are so called cheap and valuable because, uh, they're the share prices seem to be lowered in their intrinsic value and the treat at a lower price and what their fundamentals fundamentals would indicate. So it contrast to growth stocks are very start usually have lower high store earnings and price to book ratio. And why is this so eyes? Because markets are usually more sceptical towards them, combat the growth stocks. For some reason, the market is viewing views. The company unfavorably doesn't think that it has a good growth potential in the future and thus share prices lower then then what? What its revenues, earnings and its profit margins would usually allow it for for a company comparable company in the industry. However, it's important to know that off this thing called a value trap no. Every company that has low price to book ratio or price on in visual can be seen as value stocks because such stop there consensually the markets have good reasons to. Then you were stopped below what its fundamentals in the key. And if you buy, simply buy stocks very low price ago. Impressive learning resource. You may be the keys that, uh, the stock price continues to decrease or never increase us in the future, because no market correction for the increasing the price to book price to earnings ratio ever happens. Due to see, for example, the company never innovates and company has a poor management. So one proponent off this idea of buying value stocks and value investing is Warren Buffett , who can see in his court prices what u P value is what you get. So his strategy is to Archie so called cheap stocks, where he sees the amount of money piece for the shares of the company is lower than the value it gets and very me sees in the company. Hey, now on to blue chip dividend stocks. So dividend stocks are have high dividend youths, meaning that the distribute since then marv their profits in the form of dividends. Which shareholder? It's periodically being a quarterly or semiannually or annually. And, uh, really? People hope dividend stocks buy and hold it for the long term. Uh, fall long comm Passive income. So two constantly collect the the evidence. Azzan come and didn't really hold us. Our dividend stocks event don't really tried toe on money using the increases in share price, it focus more on evidence, and most defense stocks are actually blue chip stocks. And so what? Abou cheap stocks. Blue chip stocks are stocks and shares off blue chip companies, which are large and extended companies, which often include it in major market indexes like the S and P $500 Jones in Texas. So such a large companies are typically market leaders in there are respective industries, and they are share prices relatively stable for a long time with, and you have predictable earnings and cash flu. And because of that, uh, there's low volatility, uh, off their share price. And, uh, and people, usually by idea your shares just for toe, hold it for long term diffidence. Okay, lastly, I'll talk about this about any stocks. Any stocks are extremely cheap stocks really less than $5 per share. So they are very speculative and volatile. And, uh, and he's and I stopped belonging to small and usually new companies who let good track records along a long track record. It's because of that any stocks are considered more risky and usually have lower treating for him to call their small companies, not many people on the stock. So the this the frequency of stocks changing hands in markets would be quite low, and most penny stocks treated over the counter, meaning that they cannot be found on exchanges, although a few penny stocks listed on exceed public exchangers. So because of the low trading volumes there, penny stocks have low liquidity and they have white been our spreads. So penny stocks usually eyes not very recommended to the average investor because off its speculative and volatile nature. So that's all I have to share for this lesson on stocks and chest. See you in the next lesson. 4. Fixed Income: this person will be learning about fixed income or bonds. So what is fixing comment boards in the first place? So when you buy a born you actually lending money to Ibarra, you can receive payments off a fixed amount on a fixed shadow from the border. War over. Appear off the time, and Deborah can be a company in front for copper ones. And it will also be a government that, uh, who issues government wants and fixing cummerbunds are usually seen as a rather safe asset because the amount of money you inform it is quite predictable rather than share prices, which can, uh, luxury drink me. Um, however, they have been taught off a bond bubble recently in 2019 um, as as bonds are starting to have very low yields and their price have been increasing rapidly. And this is due to a number of factors, such as people the treat war, the U. S. China trade war and invited you kerf, causing talks about leaving to talks about recession. Among in the news and media and with talks of are recession looming, are people flock to save assets like bonds and buy them increasing by then metal greater amounts. And this shoots and increases its prices greatly. Uh, some see has led to a bubble. So in the bottom picture, you can see here this is an advertisement for war bonds, which has been, uh, a problem, which is, which is a way that you government used to octane finances to finance its war if it's during the world wars. Okay, so here set a key terminology used when you were talking about bonds and fixed income. Firstly, the issue our issue is the person who issues the born borrows money from you who invest the person who invests in bonds. Secondly, principle also called maturity value fees value apart value. This is the amount that the issue of boroughs from you and the amount of a joie turns you at anybody. When the maturity de ends Coupon re, I's theano interest issue apiece as a percentage of the principal. So say the prince boys. $10,000 And the coupon read is, um I listen, that would mean that the sure I will give you $500 in the form of interest. Maturity is the date that the born ends and issue or must return the principle to the lender, so a maturity divisions can be a shortest a few years, and it can be as long as decades, multiple decades read things, On the other hand, is credit risk off the issue are just like all of us when we, all of us, have credit scores. You know, when we try to apply for credit cuts, banks look at our credit. Scores are similarly. Companies and governments have credit readings, uh, which, which sort off gauge the like, how likely they are to default on the loan. Dig up, giving them when you buy de bones. So now we want to types of points. So first it has government V s copper bones. So for corporate bonds, bonds issued by companies and companies can choose to issue bonds finance. There are active diesel new projects. So how many's can't Even when he raised money, they can raise money either by issuing chefs, which is equity, or by using debts, which is lending money by issuing bonds. And sometimes companies truth to issue bonds rather than shares, because this will prevent a lot of control. Since shares represent one ship off a company So meanwhile, government issues bonds for to find similarly to finance government expenditure. But you, sir, And if other reasons toe shoe born such as to influence interest rates, he next this investment great V s Jon Bones. So, uh, like I was explaining earlier, um, how a different companies and governments have everything's. These ratings are given by a reputable companies such as Moody's S and P Global Ratings and Fitch Ratings. And they all have Step Sally Simla skills for credit readings. And everything's were actually did the mean whether the Born is an investment Greek, meaning that it's unlikely that the that the issue off the bond defaults on your one NVs junk bonds where we have a high chance and probability off default. Yeah. Next, we have fixed rate and floating rate bonds, so fixed re borns have a fixed amount of interest at regular intervals. Fouda sees like 5% constantly see it will constantly Steve Piper sent 12 given off at the Border one's existence. But floating with one's a different meaning that the doctor can actually change. The interesting give you actually change during is in the swear off the bones existence and this verbal verbal amount of interest is building to things like a market, the prevailing market interest rates. So there's Russia V s long term bonds, which depends on the duration of before their maturity and a zero coupon bonds. So zero coupon bonds actually have. Don't give you are any purity interest payments. So how you make money on them is that the offer? It bonds you at a discount from fees value. So, for instance, you can buy a $10,000 coupon born C $9000 so you lend the company $9000 but end on the maturity duration on the maturity date, the company gives you $10,000. So that's a zero coupon bond convertible born. On the other hand, is he born that can become further to equity or chest off company you something conditions are met. So how do you get into bonds so and even purchase bonds upon issuing? Usually, companies with advertise when and making known when the issuing bonds to the public. Another way is to really just exchange and buy the bonds or south bones on an exchange. So when you buy a body doesn't mean that you have to hold it all the way. Their point off its maturity. It's impossible for you to liquidate, liquidated by selling it toe someone else on an exchange. And because of that, they also Bonnie ts which trip the, uh prices of the bones. So the accident factors that affects born crisis firstly, the prevailing interest rates this usually influenced by, um, the central bank off various nations, such as for the U. S. It will be defect. Usually when the prevailing interest rates increased born prices decrease. That is because increasing interest rates will mean that all right, I can make and received crisis and got a mob. Interesting. I just put my money in a bank. So why would I sort of incentive off buying a born at a given interest rate was lowered, And I don't fact is inflation when inflation rises on the bond prices, home prices really decreases. And his because rising inflation were brought Gabriel value off the returns off the bond and lastly credit readings, the credit ratings off companies and governments, uh, might, uh, my factory over the time off the bones existence. For example, if a company sunny does very bad bet me on his financial situation Symphony Watson's. His credit ratings might be lowered and that could him really affect, uh, the value off the born price if you and the 1000 value off returns you? I had to sell the bonds before its maturity, so that's all half for once and soon makes lesson. 5. REITs: you have you want for? This next lesson will be learning about REITs or real estate investment trusts. So what are very estate investment trusts? Soviets are entities that own income producing real estate. These entities are legally or black to distribute most of their profits and income generated from rents, uh, to the shareholders. So legally, I usually oh distribute off at least 90% off the income generated from rent to a shareholders at regular intervals can be quarterly or twice a year. Or you can be in really so Reza can be an alternative for investors were interested in investing in real estate. So instead off buying your own piece off property and renting it up, you can instead buy beats. Andi reads, actually pull the money from multiple investors and used that money to purchase a portfolio off different properties, and they used income generated distributed. So that's the difference between private and public beats. So public meets our dues, which are listed on the stock exchanges and every one again, and it can be bought and sold very much like common and common stopping and common companies. Uh, but private beats are not found on stock exchanges. And because of that, D usually have less transparency compared to public beats. And I don't want to invest in arresting investment. Trust is true it yes or exchange traded funds. So, just like any stock CTF reach each year. Track city value off multiple REIT are listed in the stock exchange and gives out dividends and Piaz Um, depending on the proportionate to the portfolio off REITs that CTF tricks. It's a lot of benefits, and he reads, firstly, affordability. So instead, off having toe save a huge amount crew soft money to buy a property off real estate and rent it out for income. Um, these are much more affordable because given that the money's put from the last name off investors, the minimum our money needed to get me to reality as seeing, if any decrease. So you need me a couple of $1000 you can begin investing in REITs and were arrested and I don't benefit is on liquidity, meaning that it is very easy to liquidate or investment and convert your investment in cash when you need it due to a second emergencies. So, um, this is especially true for public streets because you can literally just sell, buy and sell them every day on the stock exchange. And this would be much more convenient as compared to, say, if you bought a property yourself and you have to go through the hassle off trying to find a buyer and if it's an emergency, or you may be forced to sell the property at a new one and market price and finding, as you cannot wait to find a good buyer. So when I don't benefit is a diversification. Vits allow you to, if sort of on a pot full you off a different properties, and in doing so, you actually reducing a recent spreading a risk out among model properties. But in contrast, if you invested a huge amount of Miami in a single property, you can have. It's a situation where you have oil eggs in one basket, where random events like see a natural disaster or Sania developer coming in and are building a lot of similar real estate and properties near yours can. Significantly increasing the supply in the region can significantly reduce the price and value off the property your own. So reads we reduced risk by allowing the investigation and another benefit of eats is that this professionally managed? You don't have to spend your time finding people to rent out your property to, um and you don't have to. I spent a lot of time strategizing which property to buy and to stay very, uh, And to go down, I'm signed contracts and make that many deals and purchase of property. So this professional managers do all this for you. But of course, the drawback will be that he charges it and feet 40 our services. So that's something para meters are REITs Consider when choosing, which agreed to invest in first place, the share price. So and secondly, we didn't distribution unit, which is the amount of money that the, uh distributes Cochet and using this to values confined to befriend you. Distribution per unit developed by price 100 will give you a distribution yield in percent . And, uh, for you and, for example, say you invested $10,000 in Evite and the distribution yield of that Reedus a 10%. That would mean you would you be given $1000 um, put in a fall in the form of dividends from that meat. However, it is important to note that a distribution deal this different from the actual yield because he share price and the price value of their feet also fluctuate of time. And even if the uh deviate decides to give you a huge amount of diffidence and give almost 100% of all its income generated although that distribution units high the actual you buy below if a price value off the, uh drops Yeah, I don't expect the price of racial which has been covered, and he, uh, in the court. The lesson on stocks and chest so similarly pricy ratio for pizza will be the share price developed by the net asset value off the uh off the beat, which is the total amount. A total value of all the real estate that owns minus all liabilities, which are the money that goes. And I know venue to a note, which is often just is the gearing ratio, which is found by using that development assets so higher, giving visual mean that the Villagers funding itself more using debts by loaning money from the bank, for instance, compared to um finding its activities using money gained from shareholders, so ah, higher gearing ratio could mean increased risk. Um, since the is a boring, a larger sum of money I don't think to look at for when deciding on whether to invest in a VT is its management and distract record. Ultimately, the performance of her read heavily depends on the the strategic thinking off the managers off the Rete in terms off the powerful you off properties and issues. So that's a very important factor to consider. And lastly, the type of wheat usually reads specialized in certain types of real estate. For example, industrial retail, such a shopping centers hospitality. We should cruise hotels and things like that, UH, healthcare, which is hospitals are and what and ah, commercial reed switches Office spaces are losing out to companies. So coming, determining the, uh sector celebrities involved in could also be extremely valuable in seeing and determining it's a long term value 6. Mutual Funds: Hi. Welcome to next, I said. Well, we will be learning about mutual friends. So what are mutual funds? Mutual funds are professionally managed investment funds that pull money from investors to purchase. Um, I said classes such a stock or boards. The mutual funds have certain advantages, firstly, diversifies your portfolio and reduces your risk. So instead, off put our money. It was a single company by purchasing. Shares in mutual funds are investing in mutual funds. Are you actually spending a risk across the entire fans apart for you off investments? Second advantage is a professional management. Mutual funds are professionally managed by a full time professionals who are very knowledgeable about financial markets and because after strive to maximize your returns for you, it is a potential because I will be off course the fees then which orphans charge, which could be quite high and therefore before investing in any mutual fund. Once you really look at the expense ratios off the fund because all too many expenses can eat into returns, that fund gives you so our number one test of mutual funds so that your friends can be classified by their principal investment type. So they are born or fixed income funds, which focus. We focus entirely on the names, I guess, bonds or fixed income. There's money market funds, focuses on shot turn debt, shot them bones and move government and corporate stopping. You could differences, whereas balance and hybrid funds, which has a mix off wolf our bonds as well as equity. Uh, meanwhile, duty farms can be further book and down to, ah, large cap Mitt kept more get funds, which focuses on investing in large, medium and small companies, respectively. Or you can because fight by industry or sector. Because there some in the industry in sector specific funds voice, for instance, that can be a mutual fund that focuses entirely on the technology sector or the health care sector, and all off its investments will be focused on companies. There are, uh, release that too dissected, steady focus. Our meanwhile index funds passive funds, meaning that they're not actively managed our professionals and because of that, it expands usually have a lower fees and inexpensive big trick are major index. Usually in the US you'll be the S and P 500 and device off index funds have been really popularized by buy a book called The Random Walk Down Wall Street by an economist called Burton, and he argued that it is in a long term, um, actively managed funds would be unable to consistently beat the market. And based on track record, it is true that right, I'm off active funds after your column for the fees that he charge. Oh, seldom or I don't really beat the markets very often. Okay, so now I move on to mutual fund structures, so the most common structure will be open in in that funds and in open in fronts, investors can redeem their share, said the Net asset value off based on the price of securities owned by the front regular. It forces can be daily or twice a month, depending on the jurisdiction and the off the country. On a exchange that the mutual funds Mr Do most Open and fans also sharp, sell their shares continuously so you can guess choose to invest and buy shares and you simply take your investment and many agree tomorrow funds the more chassis self. I see some wash acid e manage more funds, basically goes, in fact, on the other hand eyes. Rather different issue shares only once during the initial public offering, so they're very much like the sort of a normal company. And the shares are listed on an exchange. So an investor cannot sell shares back to refund, which is the keys for open infants so in the oak and resell from invested investor normal company. So the price of shares me not accurately reflect be a net asset value, and they may be sold at a premium but most common media sort of discount. This means that, um for, for instance, are closed and fund owns see $10 million worth off. Uh, a powerful new is worth $10 million but the market capitalization on the exchange could be less than $10 million. And the reason why this is so would have would be an economy is topping on its own. We shall not cover in this cost. It's something to do for inefficient markets. Are if you would like to be more about it. Okay. Finally, a unit investment trusts is the final structure. So are you in unit investment trusts that sure only issues, um, the shares their public once, and he have a limp life spin on my open and close ended funds, which exists so forever until it closes down so investors can redeem shares with the fund any time or part time nation off the unique investment trust meeting after expires. And your investment trusts usually don't have a professional manager, and a portfolio is simply established upon that creation, and it's all just exists onto the ends. So that's all I have for mutual funds and hope. See you in the next lesson. 7. Commodities: everyone. So this will be a shot lesson on commodities, which is another aspect. Plus, so what are commodities? Come on? Commodities can be spit into in soft commodities. Commodities can be precious metals like gold, silver, copper, platinum, things like that energy such as oil and natural guests, soft commodities, cultural, agricultural related, such as weak sugar, cocoa and corn. So what effects the prices of commodities? So the president commodities are usually, for example, for oil will be a barrel of oil. What attracted bro? The price of a barrel of oil. It is affected by demands and supply and off course is affected by weather which effects soft commodity supply. So, for example, there's a huge famine in and drop in the country. Trees, which are media producers off a certain soft commodity he supply can be greatly reduced and if the demand remains relatively constant because the sea is weakening is a food crop. Uh, the prices could rice dramatically within that time. People prices can also be affected by particle developments because of moves off on the oil in the world is produced. Oh, and extract that from the Middle East, uh, political issues and conflicts in the middle is could affect the oil supplies and thus our prices. But of course I love you will be wondering now, how can I treat or invest in commodities? Do I buy a barrel of oil and store in my bedroom? Why, by Chung's off gold and store in my secret, uh, underground vault. Right. So it isn't these nicely to our next lesson, which will be focused on derivatives. Off course. You can buy a bike blocks and bars of gold. It's an investment for communities, but arm often people will treat with a derivatives flattered and only commodities themselves for convenience. Sick. So I'll see you in the next lesson on derivatives. 8. Derivatives: don't come to this lesson will be learning about derivatives. So what are derivatives in the first place? They're voting securities that derive value from an underlying asset or benchmark can be stocks, bonds, commodities, etcetera, derivatives actually, contracts. And when you buy a derivative, you actually buying contract and you don't really own any underlying assets, so you don't really know by a derivative is packed toe a stock, for instance, You don't actually own any off the stop motion? Yes. So here are common examples off derivatives. So they are contracts, contracts for difference, which is kamo, formerly known as CDs. Um, so we have see if you can make profits or losses based on the movement, often underlying asset. So, for example, I via CFB in Tesla stock for it, for instance, and Tesla stock increases by a certain amount, and I want a proportionate amount, depending on my leverage. On average is sort of the the amount of money I borrow in biosafety. To better understand this, you can refer to my costs on treating 11 but basically see FDs and all you to a profit or loss on a price movements without actually owning the underlying asset and she have, these usually allow for greater leverage. I mean, you can make a huge loss of them. Huge gains with less and more money put up front, competitive if you buy the actual stock itself. So they also futures contract, which is another form of derivative, so they are different from forwards. Forward contract. Four contracts are quite similar by their Markkula, who just contracts are more like a run off the mill type of contracts. So future contracts just contracts allow you to buy or sell an asset and special spice fight price on a specified future date. So, for example, by a few check on food dress contract to buy 10 barrels of oil for, oh, $5000. Five months from now, there will be a futures contract. Um, options is not a phone derivative, so an option is a contract where they gave the onus their rights but not the obligation. So it's different from futures contracts because we just contracts told us off the country , obligated to by an options contracts owners have the right but not the obligation to buy. Or so in a set at a strike price so if you want the right to buy the asset, it will be called in cop call option. If you want to write to sell an asset will be called a put option. So there are two types off. Uh oh. Off rules. Government in options. The American type of options, uh, for American Tower. Since you get excited right to buy ourselves any time before the given maturity date for the European type, you can only exercise the right on the maturity itself. So these are just three examples off their invectives. There are other types of swaps, and it can become very, very complex. Of course, we're talking just create many different types of financial instruments in derivatives based on the assets that we have discussed earlier, like stocks or bonds. So why there that this useful? So they are used for two main reasons. Either speculation or hedging against risks. Um, for example, a spectator that's not on any stock and say Stop company now is now fact a few dollars in the investor for some reason or speculates that they start with Rice. And so he buys a call option, which allows him to buy 100 stock by the expression did so on the expression data start rises to $60. And because of this, and if you decide to seek his call option, you would make $1000 in money right in profits, excluding any fees. But if the price force you can choose not to exercise the option and all the news SST cost off the corruption contract he bought so whatever. This can also be used for hedging against risk. So an example is, say, a company needs oil next month for some of the operations or activities, but they want to hedge against the risk off. All price populations may be due to fear off some points called developments in the Middle East. So when you can just buy a futures contract to buy a model barrels of oil a specified date next month to these price so they can mitigate Innovest cough Sadie uh, price off oil shooting our increasing dramatically. Ridgewood heavily effect on their operations in a 14 month eso. Generally, derivatives are not to recommend it for long term investments. Um, the only useful I mean use for it for logical investor will be to hedge risk. Although derivatives can provide huge gains, it can also lead to huge losses. And because of that, it is not really, uh I could investment or good, good thing to buy be involved in when you want to talk about more steady conservative, long term investments. So that's all I have for this, a lesson and soon the next lesson. 9. Cryptocurrencies & Tokens: everyone s O in this ascent will be talking about cryptocurrencies and tokens, which is sort off in a more unconventional asset class. There are few unconventional asset classes like this, but for the purposes for purposes of this course that this will be the only more unconventional I said class will be talking about. So what are crypto currencies? So cryptocurrencies digital currencies that you can use for financial transaction on the are stars above traditional brick and water starts in online stores which set digital country. Actually, So it is just like or anything like us D or the British pound does that. The parties are not really regulated by any central system but idea for decentralized control. And they use this thing called a distributed ledger technology, most often the Blockchain. It helps to publicly track on the transactions when that happens with the currency. So I offensive when you use a crypto currency to buy something online or if you sell crypto currency to someone for no morph. Yet government issued money and you transfer system of currency from your wallet to the A wallet. There will be a block at it to his chain as the term Blockchain and this block includes details about transaction me and influence. The times 10 and Russians are immutable, meaning the Israel to end it or change them because I've got distribute that nature meaning that the because the information is spread across a wide range off computers and notes around the world is red hot toe sort off. Go in after the fact and I did this transaction detail so and this mixed transactions using cryptocurrencies rest secure so device off cripple policies It has been clearly seen by no , the the rush on a pries in 2018 and the subsequent crash Andi actually debates on whether you can see is actually wolf so much, you know, with a Bitcoin even rising up to $20,000 at some point in late 2018 so you can see here is a currency chart beat off btc you against USD can see that a rise. He has reason to extremely high levels in December 2017 and crashes. Although we I'm there from then on. So examples on major Cryptocurrencies are thinks that Bitcoin a theory on black coin and ripple come and they are asleep. Hundreds and hundreds of other smaller cryptocurrencies. Um, and those are often called all points. Okay, so now they have good idea of cryptocurrencies are on the Opens. So what are tokens? They are issued out in initial point offerings. I CEOs and just, like stocks or shares the represent a stick in a project or a company. So most companies conducting I CEOs are very, very early speech. So what you do is that he puts up my white people, which is sort of a project idea and a rules governing governing the use of the token and how the talk and walks, um and, uh and they sell these tokens in exchange for normal money. Like you could use a USD to buy some tokens or in exchange for other CRYPTOCURRENCIES like Bitcoin or ethereum and using the money that he cropped fun. And you get there for multiple investors by selling the tokens didn't pursue their projects . And however it is not about it, there are lost have been lost scams related toe I CEOs due to the bubble and the crease Uh , Tony, something in 2018. And so and so or rather high res, uh, I set which is very unlike traditional shares, where are usually in the i p O. An initial public offering and a stock exchange. The company already has credible long term track record, and, uh, and it's showing strong momentum. So, for example, I can see this hit like a Blockchain startup. Just raise $4 billion without the life pulled up. So that really just shows harps that things can be but auto money I just want to share. But cryptocurrencies and tokens are just for the sick off knowledge and education. And in case you want to locate some small amount off your part for you to Cryptocurrencies if you are a believer in it, right? He So that's all I have for this lesson. Thank you. 10. Recap & Project: Hi. Congratulations to making it to the end of the cost. So here's a shot. We kept off what we have covered in this cost. If there's anything that you like to revised, feel free to go back and go through a lesson again. So now, on powerful new management. So having understood all these asset classes? What, um, like, touch a bit on portfolio management? So Buffalo management is basically deciding how much funds you were. L keep to the different asset classes in which, and within each asset class, for example, stocks which sectors to invest in or what how stocks are due on investing growth stocks or value stocks or blue chip dividend stocks. So a popular management is based in deciding how you invest your money and how you're allocating funds amongst the various types of things you can invest in. So in medicine or portfolio you have toe first, consider your risk appetite. Whether you are high, are looking for high risk high returns portfolio or your more conservative Um, meaning that you have a low risk, but and you are willing to take on a slightly lower returns. Oh, in exchange for a lower risk profile, so we risk appetite would be many dependent on certain factors such a so the stage of her life if you are in very time and, for example, it is highly advisable that you take a more conservative approach to the investment. You try to grew and sustainable wealth to be at least beat inflation and get some small, decent returns, uh, for retirement. And rather than having a high risk profile, which could, ah, heavily, how do you financially and put you in a bad situation if things don't go according to plan ? I also depends on your time horizon. You're looking at shot some things. Usually you'll be high risk if you want to look at our longer term. Investments usually look at fundamentals and are you want for to look for a low risk assets . It also depends on your income, whether you have a lot of disposable income to investing and us lots of civics and expenses on, I think to know when managing a popular is diversification optimally don't want to put all their eggs in one basket and usually want to manage your miss by investing in multiple asset classes and even across our sectors and industries. So if one industries hit quite badly or certain asset classes as it crosses a bubble or instant Oh, if you're into real estate and that's a very ST Clair crash, uh, in your country, for instance, you don't want all your investments to get what? What do we because of such events? So this participation is important in portfolio management. Uh, finally, there is also a need for a certain percentage off your wealth to be in the form of cash and cash equivalents you don't want to add. Have all your money to be put into investments and in stops or in appoints optimally. You want some cash on hand for emergency situations as well as for day to day spending. So cash and cash equivalents, or CC, refers to shot some low risk and highly liquid investments. So besides the currency you hold, it could also be cashing savings account. You can put some cash in savings accounts with high interest rates, and or you can put some cash into T bills. In the US we have beaches, very short maturity timeframes off less than one year, or you can put some money in a short term fix deposit accounts. We tried to quit. You can take out of money if needed. We thought incurring a cost. Although you might have to forfeit some for interest for fixed deposit accounts. Okay, so find out and all of the crossbow yet. So they pour Simon's and you can pick any one of them. So the 1st 1 is you can either share and explain how you allocate your personal investment portfolio across the different asset classes with this custody in this course. Oh, and you can be a specific as you like, or you always, um, and be, especially as you like going down to the percentages or the particular stocks or sectors you were going to investing in high one advocate and explain your rationale for for such an allocation. The second possible Simon you can do is a research on and share by an asset class. Maybe an unconventional, androgynous not being covered in this course with the class. Yeah, So please little class project and you don't foster this environment of learning. Thank you for completing this Investing 11 close course. Hold the best and continue to grow in your understanding of finance and investing