FAQs

Most frequently asked questions

What assets should I invest in?

Choosing the right assets depends on your financial goals, risk tolerance, and time horizon. Here are some common investment assets and their estimated average annual returns:

  • Stocks: Estimated annual return: 7-10%
  • Bonds: Estimated annual return: 3-5%
  • Real Estate: Estimated annual return: 6-8%
  • ETFs & Index Funds: Estimated annual return: 5-7%
  • Cash Equivalents: Estimated annual return: 1-2%
  • Cryptocurrency: Estimated annual return: 10-20%

What is compound Interest and how can it affect my investments?

Compound interest is the process where the interest earned on an investment is added back to the principal, so that interest is calculated on the new, larger amount. This can significantly accelerate the growth of your investments over time.

Definition of Compound Interest:

Compound interest is the interest on both the initial principal and the accumulated interest from previous periods. It differs from simple interest, which is only calculated on the initial principal.

Impact of Compound Interest on Investments:

The power of compound interest is that the longer your money is invested, the more it can grow exponentially. Even small contributions can lead to large growth when compounded over many years.

Example:

For example, if you invest $1,000 with an annual return of 5%, after 10 years, you would have more than $1,600 due to the power of compound interest.

What are ETFs?

An ETF (Exchange Traded Fund) is an investment fund traded on the stock exchange, just like shares. The goal is to track an index, sector, commodity, or other financial product as closely as possible.

ETFs are a smart way to invest in a diversified, transparent, and cost-efficient manner. For beginners, broad global ETFs such as the MSCI World are a good starting point. Always pay attention to costs, diversification, and dividend policy when choosing an ETF.

Example: an ETF tracking the S&P 500 includes the 500 largest publicly traded companies in the U.S. Buying this ETF means you're automatically investing in all those companies.

Benefits of ETFs

  • Diversification: Your investment is automatically spread out.
  • Low costs: ETFs often have low management fees.
  • Transparency: Composition is publicly available.
  • Liquidity: Tradable during market hours.
  • Accessibility: You can start with small amounts.

Types of ETFs

  • Index ETFs: Track a market index such as the S&P 500.
  • Sector ETFs: Focus on sectors like technology or energy.
  • Thematic ETFs: Invest in trends like AI or sustainability.
  • Bond ETFs: Invest in bonds.
  • Commodity ETFs: Track prices of gold, oil, etc.
  • Dividend ETFs: Focus on stable dividend-paying stocks.
  • ESG ETFs: Sustainable and responsible investments.

What to watch for

  • Costs (TER): Look for a low Total Expense Ratio.
  • Diversification: More assets generally mean lower risk.
  • Physical vs. Synthetic: Actual holdings or replication via derivatives.
  • Distribution vs. Accumulation: Dividends paid out or reinvested.
  • Liquidity: Trading volume and ease of buying/selling.

Best ETF Themes for Beginners

  • Global Index ETFs: MSCI World or FTSE All-World.
  • S&P 500 ETFs: Exposure to top U.S. companies.
  • All-Country World Index (ACWI): Includes emerging markets.
  • ESG ETFs: For sustainable, ethical investments.