Entering the world of investments may seem challenging at first, especially when faced with technical language and the use of many acronyms. However, investing does not have to be complicated — it all starts with understanding some fundamental investment concepts.
Financial investment
When we talk about financial investments, we are referring to the allocation of money to the acquisition of a financial asset — such as term deposits, funds, bonds, shares, among others — with the aim of growing savings over time.
There are various financial products and instruments available in the market, suited to different investor profiles and available amounts. The choice among them depends on several factors, such as the time horizon, the level of risk involved, and the type of return expected.
Risk
It refers to the unpredictability of an asset’s behaviour. It may be associated with the possibility that an investment does not generate the expected return or even results in a loss of part of the capital. Every investment carries risk — the key lies in knowing how to manage it.
➡️ If you would like to better understand the different types of risk and how to manage them, read our article on investment risk.
Return
Return indicates how much an investment generates in gains relative to the amount invested. It is a way of measuring the performance of a financial product, usually expressed as a percentage.
Diversification
It is a strategy to reduce risk and one of the key investment concepts to keep in mind. It consists of spreading the investment across different types of assets linked to different geographies, sectors of activity, currencies, among others. This way, if one performs poorly, the others may offset it.
Liquidity
It is the ease with which an investment can be converted into money. For example, real estate (an apartment, a plot of land, an office) is less liquid than money held in a current account.
Investor profile
The investor profile is one of the most important investment concepts, as it allows the assessment of an investor’s risk tolerance. The result is obtained by completing a questionnaire covering aspects related to knowledge and experience with financial assets, ability to bear risk, financial capacity, and sustainability preferences. There are more conservative, moderate, or dynamic profiles — and an appropriate strategy is recommended for each one.
Investment horizon
It refers to the length of time for which the money will be invested. Short-term investments differ from long-term investments in terms of risk and expected return.
Investment Funds
Investment funds are financial instruments that pool money from multiple investors to invest in different assets. They are managed by professionals and offer a practical way to achieve diversification.
Bonds
Debt securities issued by companies or governments. By purchasing a bond, you are lending money in exchange for a return (coupon).
Term Deposits
Term deposits are a type of investment in which a sum of money is deposited with a bank for a predefined period, in exchange for an interest rate. They are associated with guaranteed capital and interest and are therefore considered low-risk products.
➡️ Learn more about this type of product in our article on Term Deposits.
Knowing these investment concepts is an essential step to invest in a more informed way and in line with your profile.
This communication was produced by Banco Finantia for information purposes only and does not constitute an investment recommendation. In preparing this communication, no investment objectives, financial situations, or specific needs of investors were considered. Accordingly, the information was not tailored to any actual or potential investor, nor were any specific circumstances of such investors taken into account.
The information disclosed is based on market conditions prevailing at the time, as well as on information obtained from recognised third-party entities, which are public sources. Banco Finantia has not independently verified the data or information provided by those entities. As the recipient of this communication is aware of this situation, Banco Finantia cannot, under any circumstances, be held liable for any errors, omissions, or inaccuracies contained in this document or arising from the use of such information. Banco Finantia accepts no responsibility for any direct or indirect losses or damages that may be incurred by those who carry out transactions based on the information provided.
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