Description
Transcript
Stocks… Commodities… Indices… Currencies… Crypto.
Where do I start?
Let’s start with a deep breath.
Hey, I’m Sam, a Market Analyst at eToro.
In this video we’re going to walk through some of the most popular asset classes so you’ll feel much more comfortable the next time you hear them.
So, here we go!
Stocks
Stocks are shares of ownership in a public company. Each share has a value based on the company’s total worth, divided by the total available number of shares.
Stock prices vary during trading hours and can be influenced by supply and demand factors and other variables such as companies’ reports and economic or geo-political events.
Cryptoassets
Cryptoassets are fundamentally decentralised digital assets created for online use.
The first cryptoasset, Bitcoin, which was created in 2008, is still by far the most popular, influential and largest crypto out there.
However, it is important to understand that more than a decade after the inception of Bitcoin, and with more than 12,000 other cryptoassets out there – the crypto sector is still in its infancy, and is more volatile than other asset classes.
Indices
Indices are stock indexes that measure the performance of a regional group of stocks over time.
Some of the most famous indices are probably ones you’ll have heard mentioned before like the American S&P 500, Dow Jones and Nasdaq indices.
So if you believe a certain area of the world will prosper in the future, you can consider buying an index exposed to that economy and potentially enjoy this region’s success.
ETFs
Not too dissimilar to an index, an ETF, or exchange-traded-fund, is a basket of instruments usually designed to track a specific segment or sector of the financial market.
So if indices track performance of stocks that share the same region – ETFs can track different kinds of asset classes (like stocks, bonds, currencies and commodities) – that share the same market sector.
Commodities
A commodity is a basic good or raw material, like oil or gold, that is used to produce more complex goods.
One may decide to invest in a certain commodity based on the swings in its supply and demand.
So, for example, if you expect a great demand for heating oil in the next winter, you may consider to invest in it, assuming that its price may probably rise.
Currencies
Currency investing, AKA foreign exchange or Forex, is the process of buying and selling currencies.
For example, some investors may want to invest in the US Dollar as they believe that, with rising interest rates, it will continue to strengthen.
To sum it up in one word, diversify.
We’ve covered six of the most prominent asset classes. Most investors diversify and pick investments from different asset classes in order to manage risk, so if one of the asset class drops, the other ones cover it and mitigate the loss.
So if there’s one word to remember besides all the asset classes we’ve just learned – it’s diversification.
But more on that – on our following videos. See you there!