Trust Radio Episode 5 – Steps to Investing: How to get started in investing
In this episode, Laura Thomas is joined by Simon Longfellow, co-founder of stepstoinvesting.com. Steps to Investing is an independent company set up to help people get started on their own investment journeys.
Laura and Simon discuss the rationale that underpinned the launch of Steps to Investing. They also explore how inexperienced investors can get started in investing, the different types of investment vehicles and the risks that come with investing in the stock market.
For a full list of terms, please see our glossary.
An investment approach where a fund manager actively takes decisions about which and what proportion of investments to hold, often with a goal of outperforming a specific index. It relies on a fund manager’s investment skill. The opposite of passive investing.
A way of spreading risk by mixing different types of assets/asset classes in a portfolio. It is based on the assumption that the prices of the different assets will behave differently in a given scenario. Assets with low correlation should provide the most diversification.
The use of borrowing to increase exposure to an asset/market. This can be done by borrowing cash and using it to buy an asset, or by using financial instruments such as derivatives to simulate the effect of borrowing for further investment in assets.
A security that tracks an index (such as an index of equities, bonds or commodities). ETFs trade like an equity on a stock exchange and experience price changes as the underlying assets move up and down in price. ETFs typically have higher daily liquidity and lower fees than actively managed funds.
Government policy relating to setting tax rates and spending levels. It is separate from monetary policy, which is typically set by a central bank. Fiscal austerity refers to raising taxes and/or cutting spending in an attempt to reduce government debt. Fiscal expansion (or ‘stimulus’) refers to an increase in government spending and/or a reduction in taxes.
Securities that cannot be easily bought or sold in the market. For example, shares with a high market capitalisation are typically liquid as there are often a large number of willing buyers and sellers in the market.
Value investors search for companies that they believe are undervalued by the market, and therefore expect their share price to increase. One of the favoured techniques is to buy companies with low price to earnings (P/E) ratios. See also growth investing.
The rate and extent at which the price of a portfolio, security or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. It is used as a measure of the riskiness of an investment.
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.
Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.