Investment Guide: Key Financial Concepts Every Beginner Should Know

With the market flooded with lunchboxes claiming to be "inflation-resistant," can your income keep up with the rising prices in the current inflationary environment? To effectively combat inflation, learning about investment planning can help you potentially gain returns. However, as a beginner investor, if you want to grow your wealth further and gradually achieve your financial goals, you need to pay attention to the following basic investment concepts and key factors!What is investing?Investing involves placing your assets in different places to achieve the goal of preserving their value, and expecting additional returns in the future. Therefore, before investing, you should choose investment tools for basic analysis, evaluate various risks based on factors such as the financial or operational condition of the company, and make appropriate investment amounts. Generally, the lower the product risk, the lower the potential return.Choose investment products carefullyWhile stocks, bonds and funds may seem similar, there are significant differences! As a beginner, can you distinguish between these investment products?
  • Stocks: Stocks are a way for companies to raise funds by selling ownership stakes. Once you become a shareholder, you may have the opportunity to receive dividends and bonuses when the company earns profits. Stocks are usually bought and sold in the trading market, and investors can consider various factors and decide the timing of buying and selling based on the company's stock price performance to profit from trading.
  • Bonds: When investors purchase bonds from issuing institutions, it is equivalent to lending funds. The issuing institution is required to pay interest and repay the principal according to the terms of the bond when it matures.
  • Funds: Funds pool funds from different investors for investment, and the investment strategy and portfolio of the fund are formulated and managed by a fund manager. Buying a fund is equivalent to buying a basket of assets.
  • Derivative instruments: Financial instruments derived from underlying financial commodities such as stocks and bonds, subject to high regulation. Derivative instruments can be understood as a "trading contract." For example, in the case of stock futures, the contract specifies the financial value of a certain number of stocks to be bought or sold at a predetermined price on a specified date in the future. Because the terms of the contract for different derivative instruments vary, the risks are relatively high, and they may not be suitable for ordinary investors.
Every type of investment involves risks, and the choice depends on the specific circumstances of the investor. Investors should consider their financial plan progress, assess their risk tolerance, and choose an investment portfolio that is suitable for themselves.Common Mistakes for BeginnersAs a beginner in investment and wealth management, have you ever made the following two common mistakes?
  • Trend-chasing: When it comes to investing and managing wealth, beginners often receive investment related information from peers or the internet and blindly rush into the market without proper analysis. However, factors such as a company's financial status, industry outlook, and political factors can all have an impact. Therefore, blindly following and investing based on market news and rumors may not be the most accurate approach.
  • Being too impatient: Without proper analysis, investors who make buying or selling decisions based solely on market fluctuations often end up losing more than they gain.
Therefore, investment and wealth management are not hearsay. It is important to conduct comprehensive analysis for investment products each time, and avoid making decisions based solely on short-term performance.Key Points for Beginner Investment and Wealth Management
  • Understanding investment objectives clearly: Beginners need to understand their investment objectives in order to decide on suitable investment plans and products. Diversified investment portfolios or long-term holding of some investment products can be chosen for risk diversification and reduction.
  • Saving unnecessary expenses: Consider investing in assets with lower management fees to help reduce investment costs and achieve cost-saving effects for investment and wealth management.
  • Reviewing and adjusting investment portfolios in a timely manner: Everyone's risk tolerance will change with different stages of life. It is important to review investment strategy timely and adjust investment portfolios accordingly to suit the situation for investment and wealth management.
WeLab Bank's GoWealth Digital Wealth Advisory provides personalized advice based on your investment objectives, helping you embark on smart investment and wealth management. For more information, check out: you want to get more investment inspiration and insights and stay in the know of the latest market trends, you can subscribe our YouTube channel and watch our WeLab Bank Wealth Insight video series: NoticeThis document is for general information only. The information or opinion herein is not to be construed as professional investment advice or any offer, solicitation, recommendation, comment or any guarantee to the purchase or sale of any investment products or services. This document is for general evaluation only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons.The information or opinion presented has been taken from sources (including but not limited to information providers and fund houses) believed to be reliable by WeLab Bank, but WeLab Bank makes no warranties or representation as to the accuracy, correctness, reliabilities or otherwise with respect to such information or opinion, and assume no responsibility for any omissions or errors in the content of this document. WeLab Bank does not take responsibility for nor does WeLab Bank endorse the information or opinion provided by any information provider or fund house.Past performance is not indicative of future results. WeLab Bank makes no representation or warranty regarding future performance. Any forecast contained herein as to likely future movements in interest rates, foreign exchange rates or market prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in interest rates, foreign exchange rates or market prices or actual future events or occurrences (as the case may be).You should not make any investment decision purely based on this document. Before making any investment decisions, you should consider your own financial situation, investment objectives and experiences, risk acceptance and ability to understand the nature and risks of the relevant product(s). WeLab Bank accepts no liability for any direct, special, indirect, consequential, incidental damages or other loss or damages of any kind arising from any use of or reliance on the information or opinion herein. You should seek advice from independent financial adviser if needed.WeLab Bank is an authorised institution under Part IV of the Banking Ordinance and a registered institution under the Securities and Futures Ordinance (CE Number: BOJ558) to conduct Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.This document is issued by WeLab Bank. The contents of this document have not been reviewed by the Securities and Futures Commission in Hong Kong.