April 20, 2021 • 19 mins
Hello! and welcome to Everyday Finance and Economics with the Siglers! The podcast where we discuss what you need to know about personal finance and economics and give you practical advice on how to get started and be smart with your money.
This episode is the first part of our series on the world of investments. We are starting with the most basic of basics, defining the investing terms that you absolutely need to know. Join us next time for some more investing knowledge and tips and tricks for the budding investor!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Hello, and welcome to everyday finance and economics
with the Sigler's the podcastwhere we discuss what you need
to know about personal financeand economics, and give you
practical advice on how to getstarted and be smart with your
money where your host Glen andChristina.
So
Speaker 2 (00:22):
Christina, what's going on in the economy this
Speaker 1 (00:24):
Week.
Okay.
So here's, here's what went downthis week.
This week, the long awaited CPIor consumer price index came out
and that measures the changes inprice of a basket of
representative household goods,things that everybody has in
their house, everybody needs.
Um, they measured the changes inprice of those goods over time.
(00:45):
And it comes out every year.
This year, the consumer pricesRose by the largest amount in
eight and a half years, whichmeans prices in general are
rising.
Many economists and businessleaders are concerned because
this would normally be a sign ofinflation.
But the chairman of the federalreserve drone pal, as that, this
is just pent up demand.
(01:05):
As people get vaccinated, um,all the pent up, um, quarantine
demand for things is gettingreleased and now that people are
safer, um, but if this inflationpersists, then the federal
reserve will have to take othermeasures such as raising
interest rates that could dampeneconomic recovery, which is
really important at this point.
Speaker 2 (01:25):
That's the big, that's the biggest issue.
Um, business leaders andinvestors are concerned that,
um, if, if inflation ispersistent and is above the fed
target of 2%, which they saidthey will S uh, allow it to run
(01:45):
hot, uh, then they'll have toclamp down by, um, in the past.
What they've done is they'veraised interest rates
considerably.
And if you raise interest ratesthat raises the cost of cost of
borrowing and other things,which slows down economic
activity,
Speaker 1 (02:04):
That's true.
But the thing is you have toalso consider the fact that our
economy is not in a normaleconomic state right now.
We were already kind of in a, ina damping sense of
Speaker 2 (02:15):
Right.
And, and, and that's the bigconcern.
We haven't seen a situation likethis, right?
And so what are, you know, whatare the tools that they have in
place or the, you know, willthey manage it correctly, uh,
and, and, and navigate the,through this situation, uh, for
everybody's best interest.
Speaker 1 (02:35):
Yeah, there's a lot of, there's not a lot of
precedent for this.
So they're going to have to bereally careful because nobody
really knows what to do.
And our economic term for thisweek is inflation.
Inflation is the rate ofincrease of prices over a given
period of time.
A prime example of this is how,uh, our grandparents and parents
used to tell us that they usedto be able to buy soda or candy
(02:56):
or chips or anything for like 25cents.
And now they cost like a dollar50.
Um, so that's, that's howinflation works.
Prices rise over time.
Speaker 2 (03:05):
Yes.
I used to be able to buy a canof soda for 15 cents.
I really went to that.
I cannot do that anymore.
Speaker 1 (03:11):
I wish I could relate.
So to cost so much, now it costslike a dollar 75 anyway.
All right, dad, I think it'stime to get into this week's
topic.
What are we talking about today?
Speaker 2 (03:20):
Today?
We're talking about investing.
Speaker 1 (03:23):
That is a very great topic, uh, especially for young
college students like me.
All right, dad, what isinvesting
Speaker 2 (03:30):
Well?
Investing is the act ofcommitting your money to an
endeavor with the expectation ofobtaining, uh, either a stream
of income from it or profit whenyou sell.
Speaker 1 (03:46):
Okay.
So putting money in something toget money out of it,
Speaker 2 (03:50):
Right?
And, and, and you're, hopefullyyou're going to get a lot more
money out of it.
This is unlike consuming, whereyou're just, Hey, I'm giving my
money and I get, you know, foodor something.
You get something that you, youwill use up immediately like a
service, right?
Like a better service.
But this is either a, uh, uh,looking to acquire a share of an
(04:16):
asset that will eitherappreciate over time or generate
additional revenues for you overtime.
Speaker 1 (04:24):
In layman's terms, this is putting money in
something to get more money out.
Speaker 2 (04:30):
That's the short term, and this is different than
savings because it involvesrisk.
And I'm going to just put it outout here.
You know, risk means you couldlose some or all of your money.
And in certain situation youcould lose more money than you
actually put in.
But you know, that those arewe'll start.
We'll talk about that later, but
Speaker 1 (04:51):
This is very important to consider.
Just be careful as a generalword of caution.
All right, dad, there's so manyterms involved with investing.
There's so many acronyms andthings that you just people say,
and I'm just expected to know.
So what are some different typesof investments?
Speaker 2 (05:11):
Okay.
We will start with the, the bigcategories.
Um, ones that everyone should behearing about are, are, are
equities.
Those are stocks.
You know, those are shares ofcompanies.
Uh, there are publicly listedcompanies where you can buy a
piece of Tesla or Amazon orMicrosoft, and you own, you
(05:38):
know, a tiny sliver of thatentire company.
Um, and those companies could beus companies.
They could be Canadiancompanies.
You can buy shares of companiesanywhere that they, uh, that
anywhere there is a publicexchange.
Um, for the most part, you canget a, get a piece of that
(05:58):
company.
Speaker 1 (05:59):
So technically these publicly traded companies are
owned by people who own theequities, right?
That's
Speaker 2 (06:05):
Exactly right.
So it's not owned
Speaker 1 (06:07):
By like the CEO or whatever.
They just like manage it.
Speaker 2 (06:10):
So that's the difference between a privately
held company and a publicly heldcompany.
And so privately held companyit's, you know, either the
family or the person thatstarted, they are the owner.
They, they can make all thedecisions, a publicly held
company.
The management of the companyworks for the shareholders and
(06:32):
the shareholders can, uh, candirect the companies to do
certain things or not.
Okay.
Now there's lots of ways to ownequities.
You can own them, uh, in buyingstocks, you can't own them
through a mutual funds.
And a mutual fund is a, is abunch of stocks together.
(06:58):
Uh, usually put together in a,in a common theme, whether you
like all that's right, all tech,all, all consumer goods, all,
all fast growing companies,things of that nature, um, you
know, uh, money managers seem tothink they can get an advantage
(07:20):
because they concentrate on thatarea.
And, and they put together amutual fund based on those
themes.
And, you know, a little bitdifferent than mutual funds is
something called an ETF.
And that's an exchange tradedfund.
It acts very similar to, uh, toa mutual fund.
The difference is mutual fundsonly trade at the end of the day
(07:41):
, uh, exchange them, uh, fortheir value.
Uh, that's calculated at the endof the day where an ETF can be
traded just like a stockthroughout the day.
Speaker 1 (07:52):
Okay.
Let's back up.
Let's back up a little bit.
So when you say throughout theday, whose day are we talking
about, we're talking about
Speaker 2 (07:57):
What about the day of the act of Mark and for the U S
markets that's nine 30 to 4:00PM Eastern standard time.
So, um, you know, the New Yorkstock exchange, New York stock
exchange the NASDAQ.
Now there are after hoursthings, but we'll just talk
about that.
Speaker 1 (08:15):
That's so much, that's so much more complicated.
The thing is about like these,it can get as complicated as you
don't want it to.
It can get so complicated.
That is true and morecomplicated than makes sense for
anyone.
Really?
Speaker 2 (08:29):
Yes, but we're, we're trying to give everybody the
basic, so we'll stick with theinitial easy things for
everybody.
So we've talked about equities,we've talked about equities
trading days from nine 30 tofour, right?
You, you buy or sell your stocksbetween nine 30 and four
exchange traded funds.
You can try, you know, you canbuy them or sell them any minute
(08:52):
of that time period for mutualfunds, you can put in your order
during the day, but you won'tget a price until after the
exchanges close and all the, andthe mutual fund company has an
idea of what the prices were forall the stocks in their fund.
Speaker 1 (09:11):
Right.
Okay.
Okay.
That makes sense.
Okay.
All right.
Other things.
Speaker 2 (09:16):
So we've talked about equities.
Now, we're going to talk aboutdebt and fixed income.
Those are bonds and other fixedinstruments.
So when you buy equities, you'rebuying a share of the company.
Bonds are ways that companiescan borrow money.
(09:37):
They issue bonds, and it's, it's, uh, it's an IOU.
They promise to pay you backyour money, plus some interest.
And, uh, but companies, aren'tthe only, only groups that are
entities, that issue bonds.
You can get them fromgovernments.
Um, so many governments at everylevel.
(10:00):
And, um, they, uh, bonds, uh,range in, in length.
You can get short-term bonds,you can get, or short-term debt
instruments as little as well.
Banks can do stuff within a dayand a day and seven days, stuff
like that.
But most folks are looking at,uh, three months, six months,
(10:22):
um, uh, year five year, twoyear, five year, 10 year, 30
year, that that's theirtraditional, um, um, yield curve
that describes, um, the interestrate.
That's how, you know, how longthe, the, the, the duration of
the bonds or the debtinstrument, plus the interest
(10:42):
that you would get for that bond, uh, or for, for bonds in
general.
Um, the, the general concept isthat the longer that, that
company borrows your money, thelonger the bond, the more
interest you should get for it.
So if, uh, if you want to holdmy money for a day, you might
(11:04):
get like a fraction of apercent, but if you want to hold
my money for 30 years, youbetter pay me a whole lot more.
Because I, as the, as the, uh,uh, as the holder of debt, you
got to compensate me for theother things I can do with my
money and the risk of holding mymoney for such a long time.
Speaker 1 (11:24):
So debt investing like bonds is you giving a loan
to a company or a government orwhatever, and they'll pay you
back at the end of the term.
Speaker 2 (11:34):
That's exactly right.
Or, and here's what a lot ofpeople do.
You can trade bonds.
So not only can
Speaker 1 (11:41):
You buy it, it doesn't have to stay with you.
Speaker 2 (11:43):
It doesn't have to stay with you.
Somebody else might pay you morefor it, and you, you might want
to get out it.
So those, you know, so those arethings that the, you know,
people need to pay attention to.
Another category is real estate.
And so for most of us, that's ahouse, but there's lots of forms
(12:04):
of real estate.
There's just owning land.
There's, you know, houses,buildings for self use,
commercial property, rentalproperty, and there's even, um,
um, things called real estateinvestment trusts or, and real
estate ETFs, which essentially amutual fund for, for every list.
Speaker 1 (12:27):
I think a lot of the real estate though is, well, I
mean, yeah, unless you're buyingit, but there's a lot that goes
through inheritance for realestate and there's value in that
too.
Speaker 2 (12:36):
Yeah, absolutely.
Um, but you know what I want,what we want to point out to
people here is that you can, andsome people do, um, buy houses
or buy commercial property to,uh, as a source of income.
So you'll rent, rent, rent itout, um, repeatedly.
(13:01):
Um, and
Speaker 1 (13:02):
Maybe Airbnb, Airbnb is that
Speaker 2 (13:06):
Kind of, kind of, but what I'm in a college town,
you'll have people buying up, um, lots of houses and renting
them out to college students.
And every year more co you know,different college students come
in and they rent them out to me.
Or you can do that in, in yourtown.
Um, there's a lot of peopledoing things like that.
Okay.
(13:26):
Now, if you don't want the, the,the challenge of owning that
property, because now you'reresponsible for all the repairs
and stuff, that's when you wouldget into something like a REIT
where the traded fund that's thetraded fund.
Okay.
All right.
So the next category iscommodities, and everybody is
(13:48):
familiar with that.
That's oil timber, preciousmetals, gold, silver platinum,
and even currencies food andfood products, soybeans, wheat
hugs, things like that.
Speaker 1 (14:03):
Yeah.
Straighten hugs, somebody who'sout there trading Hawks.
Right.
Speaker 2 (14:06):
And, and, and there's a, there's a future skill.
This is where you start gettinginto things like futures,
contracts, delivering.
Speaker 1 (14:15):
Yeah.
I've seen like gold futures andstuff like that.
The 10 year.
Speaker 2 (14:19):
Well, typically the, the best, the easiest way to
describe futures is reallythrough, um, ag agricultural
products.
So the farmer, he knows he's gothis wheat coming in, in, in say
September, but he needs moneynow.
So he sells a contract todeliver a hundred bushels of
(14:44):
wheat in September for setprice.
You as a, as an, as an, uh, agbusiness, you want to lower your
risk.
You don't want to wait untilSeptember to buy all your, all
your wheat.
Cause you don't know what theprice is going to be.
And you need, you know, you needcertain amount of wheat, so you
(15:06):
want to reduce your risk too.
So you're going to have acontract that they get some
wheat in September as well.
And those prices, those contractprices can fluctuate through
through the summer because, Hey,the weather's good.
The weather's bad, the crops,all of those things influence
(15:29):
all of those things influence.
What's going to happen withthose punches.
Okay.
All right.
And now we're going to get intoalternatives and that's a really
loose category.
Includes tangible assets, suchas art wine, antiques stamps.
(15:50):
And what everybody's talkingabout now is, is
cryptocurrencies.
But there's just
Speaker 1 (15:57):
Are the, are the NFTs, the non fungible trade?
[inaudible]
Speaker 2 (16:01):
An alternative.
I would certainly consider thatan alternative
Speaker 1 (16:05):
Asleep because nobody even knows what well, yeah, it
is like, it is like, it's just athing on the internet, but only
you can own it, I guess.
Speaker 2 (16:15):
Uh, yeah.
Speaker 1 (16:16):
That's like the hot new thing, like cryptocurrency
is a hot new thing, but NFTs arelike the hot high, like this is
the, yeah.
This is their moment.
Yeah.
Speaker 2 (16:25):
Yep.
And I'll, uh, and we're goingto, now, we're going to get into
now.
There's the big thing aboutalternatives for me is make sure
you understand what you'reinvesting in and the risks, um,
that will, that will help you.
Um, if not, you're justspeculating and, and, and those
(16:46):
that don't know enough, youknow, have the highest risk of,
of, of, um, of losing and thosekinds of things.
Speaker 1 (16:56):
And also speculation is illegal, right?
Not illegal, highly frowned uponby the sec.
Speaker 2 (17:02):
Well, um, look, there's a lot of markets built
on speculation.
That's true.
Uh, so, um, it's not illegal.
It's no, it's not, uh, it's notillegal.
It's I will just say it's, it'sunwise, but a lot of people
gotten rich on speculation, butthere's a flip side to that for,
(17:25):
for, for, for all of thosewinners, there's probably a
whole lot more losers.
Speaker 1 (17:30):
Let's say 1% winners, 99% losers.
I don't have any data on that.
No data.
This is unfounded.
This is unfounded speculation.
Yeah.
We're doing it right now.
Speaker 2 (17:43):
We're doing it right now.
All right.
And then there's, uh, one lastbucket that, you know, a lot of
people don't consider, uh, as a,as, as an asset class, but I, I
will, because it helps balanceout all this other stuff and
it's cash.
Yep.
Just, just play it all hard cashor cash equivalents and that's
(18:05):
money in the bank, money in anon-risky non, non, um, nothing
sexy, a savings account or, youknow, something that's really
easily convertible to cash
Speaker 1 (18:22):
Like a credit union or something does a credit union
count for that.
I don't know, banks creditunions.
You can do all that stuff.
Yeah.
That's an investment because youget interest back.
That's more money.
I have 2 cents more than I didbefore.
Speaker 2 (18:36):
So the, the bigger issue is, you know, go, go back
to my definition of investment.
Is there risk involved?
Speaker 1 (18:42):
No, not really.
Well, well, yes.
Credit
Speaker 2 (18:48):
And banks have gone bankrupt in the past.
So that is your risk, low risk,but it's low risk.
And in the United States, youhave something called, um, FDI C
something and other things for,um, for credit unions, um, that
essentially ensure, and willallow folks to get their money
(19:10):
back.
Speaker 1 (19:15):
All right.
That's it for our first part ofour investing series, be sure to
join us again.
Next time.
When we go further into theworld of investments, if you
have any questions for us, youcan email
us@efespodcastatgmail.com andfollow our Instagram at E F E S
podcast.
Thank you so much, guys.
Hello, and welcome to everyday finance and economics
with the Sigler's the podcastwhere we discuss what you need
to know about personal financeand economics, and give you
practical advice on how to getstarted and be smart with your
money where your host Glen andChristina.
So
Speaker 2 (00:22):
Christina, what's going on in the economy this
Speaker 1 (00:24):
Week.
Okay.
So here's, here's what went downthis week.
This week, the long awaited CPIor consumer price index came out
and that measures the changes inprice of a basket of
representative household goods,things that everybody has in
their house, everybody needs.
Um, they measured the changes inprice of those goods over time.
(00:45):
And it comes out every year.
This year, the consumer pricesRose by the largest amount in
eight and a half years, whichmeans prices in general are
rising.
Many economists and businessleaders are concerned because
this would normally be a sign ofinflation.
But the chairman of the federalreserve drone pal, as that, this
is just pent up demand.
(01:05):
As people get vaccinated, um,all the pent up, um, quarantine
demand for things is gettingreleased and now that people are
safer, um, but if this inflationpersists, then the federal
reserve will have to take othermeasures such as raising
interest rates that could dampeneconomic recovery, which is
really important at this point.
Speaker 2 (01:25):
That's the big, that's the biggest issue.
Um, business leaders andinvestors are concerned that,
um, if, if inflation ispersistent and is above the fed
target of 2%, which they saidthey will S uh, allow it to run
(01:45):
hot, uh, then they'll have toclamp down by, um, in the past.
What they've done is they'veraised interest rates
considerably.
And if you raise interest ratesthat raises the cost of cost of
borrowing and other things,which slows down economic
activity,
Speaker 1 (02:04):
That's true.
But the thing is you have toalso consider the fact that our
economy is not in a normaleconomic state right now.
We were already kind of in a, ina damping sense of
Speaker 2 (02:15):
Right.
And, and, and that's the bigconcern.
We haven't seen a situation likethis, right?
And so what are, you know, whatare the tools that they have in
place or the, you know, willthey manage it correctly, uh,
and, and, and navigate the,through this situation, uh, for
everybody's best interest.
Speaker 1 (02:35):
Yeah, there's a lot of, there's not a lot of
precedent for this.
So they're going to have to bereally careful because nobody
really knows what to do.
And our economic term for thisweek is inflation.
Inflation is the rate ofincrease of prices over a given
period of time.
A prime example of this is how,uh, our grandparents and parents
used to tell us that they usedto be able to buy soda or candy
(02:56):
or chips or anything for like 25cents.
And now they cost like a dollar50.
Um, so that's, that's howinflation works.
Prices rise over time.
Speaker 2 (03:05):
Yes.
I used to be able to buy a canof soda for 15 cents.
I really went to that.
I cannot do that anymore.
Speaker 1 (03:11):
I wish I could relate.
So to cost so much, now it costslike a dollar 75 anyway.
All right, dad, I think it'stime to get into this week's
topic.
What are we talking about today?
Speaker 2 (03:20):
Today?
We're talking about investing.
Speaker 1 (03:23):
That is a very great topic, uh, especially for young
college students like me.
All right, dad, what isinvesting
Speaker 2 (03:30):
Well?
Investing is the act ofcommitting your money to an
endeavor with the expectation ofobtaining, uh, either a stream
of income from it or profit whenyou sell.
Speaker 1 (03:46):
Okay.
So putting money in something toget money out of it,
Speaker 2 (03:50):
Right?
And, and, and you're, hopefullyyou're going to get a lot more
money out of it.
This is unlike consuming, whereyou're just, Hey, I'm giving my
money and I get, you know, foodor something.
You get something that you, youwill use up immediately like a
service, right?
Like a better service.
But this is either a, uh, uh,looking to acquire a share of an
(04:16):
asset that will eitherappreciate over time or generate
additional revenues for you overtime.
Speaker 1 (04:24):
In layman's terms, this is putting money in
something to get more money out.
Speaker 2 (04:30):
That's the short term, and this is different than
savings because it involvesrisk.
And I'm going to just put it outout here.
You know, risk means you couldlose some or all of your money.
And in certain situation youcould lose more money than you
actually put in.
But you know, that those arewe'll start.
We'll talk about that later, but
Speaker 1 (04:51):
This is very important to consider.
Just be careful as a generalword of caution.
All right, dad, there's so manyterms involved with investing.
There's so many acronyms andthings that you just people say,
and I'm just expected to know.
So what are some different typesof investments?
Speaker 2 (05:11):
Okay.
We will start with the, the bigcategories.
Um, ones that everyone should behearing about are, are, are
equities.
Those are stocks.
You know, those are shares ofcompanies.
Uh, there are publicly listedcompanies where you can buy a
piece of Tesla or Amazon orMicrosoft, and you own, you
(05:38):
know, a tiny sliver of thatentire company.
Um, and those companies could beus companies.
They could be Canadiancompanies.
You can buy shares of companiesanywhere that they, uh, that
anywhere there is a publicexchange.
Um, for the most part, you canget a, get a piece of that
(05:58):
company.
Speaker 1 (05:59):
So technically these publicly traded companies are
owned by people who own theequities, right?
That's
Speaker 2 (06:05):
Exactly right.
So it's not owned
Speaker 1 (06:07):
By like the CEO or whatever.
They just like manage it.
Speaker 2 (06:10):
So that's the difference between a privately
held company and a publicly heldcompany.
And so privately held companyit's, you know, either the
family or the person thatstarted, they are the owner.
They, they can make all thedecisions, a publicly held
company.
The management of the companyworks for the shareholders and
(06:32):
the shareholders can, uh, candirect the companies to do
certain things or not.
Okay.
Now there's lots of ways to ownequities.
You can own them, uh, in buyingstocks, you can't own them
through a mutual funds.
And a mutual fund is a, is abunch of stocks together.
(06:58):
Uh, usually put together in a,in a common theme, whether you
like all that's right, all tech,all, all consumer goods, all,
all fast growing companies,things of that nature, um, you
know, uh, money managers seem tothink they can get an advantage
(07:20):
because they concentrate on thatarea.
And, and they put together amutual fund based on those
themes.
And, you know, a little bitdifferent than mutual funds is
something called an ETF.
And that's an exchange tradedfund.
It acts very similar to, uh, toa mutual fund.
The difference is mutual fundsonly trade at the end of the day
(07:41):
, uh, exchange them, uh, fortheir value.
Uh, that's calculated at the endof the day where an ETF can be
traded just like a stockthroughout the day.
Speaker 1 (07:52):
Okay.
Let's back up.
Let's back up a little bit.
So when you say throughout theday, whose day are we talking
about, we're talking about
Speaker 2 (07:57):
What about the day of the act of Mark and for the U S
markets that's nine 30 to 4:00PM Eastern standard time.
So, um, you know, the New Yorkstock exchange, New York stock
exchange the NASDAQ.
Now there are after hoursthings, but we'll just talk
about that.
Speaker 1 (08:15):
That's so much, that's so much more complicated.
The thing is about like these,it can get as complicated as you
don't want it to.
It can get so complicated.
That is true and morecomplicated than makes sense for
anyone.
Really?
Speaker 2 (08:29):
Yes, but we're, we're trying to give everybody the
basic, so we'll stick with theinitial easy things for
everybody.
So we've talked about equities,we've talked about equities
trading days from nine 30 tofour, right?
You, you buy or sell your stocksbetween nine 30 and four
exchange traded funds.
You can try, you know, you canbuy them or sell them any minute
(08:52):
of that time period for mutualfunds, you can put in your order
during the day, but you won'tget a price until after the
exchanges close and all the, andthe mutual fund company has an
idea of what the prices were forall the stocks in their fund.
Speaker 1 (09:11):
Right.
Okay.
Okay.
That makes sense.
Okay.
All right.
Other things.
Speaker 2 (09:16):
So we've talked about equities.
Now, we're going to talk aboutdebt and fixed income.
Those are bonds and other fixedinstruments.
So when you buy equities, you'rebuying a share of the company.
Bonds are ways that companiescan borrow money.
(09:37):
They issue bonds, and it's, it's, uh, it's an IOU.
They promise to pay you backyour money, plus some interest.
And, uh, but companies, aren'tthe only, only groups that are
entities, that issue bonds.
You can get them fromgovernments.
Um, so many governments at everylevel.
(10:00):
And, um, they, uh, bonds, uh,range in, in length.
You can get short-term bonds,you can get, or short-term debt
instruments as little as well.
Banks can do stuff within a dayand a day and seven days, stuff
like that.
But most folks are looking at,uh, three months, six months,
(10:22):
um, uh, year five year, twoyear, five year, 10 year, 30
year, that that's theirtraditional, um, um, yield curve
that describes, um, the interestrate.
That's how, you know, how longthe, the, the, the duration of
the bonds or the debtinstrument, plus the interest
(10:42):
that you would get for that bond, uh, or for, for bonds in
general.
Um, the, the general concept isthat the longer that, that
company borrows your money, thelonger the bond, the more
interest you should get for it.
So if, uh, if you want to holdmy money for a day, you might
(11:04):
get like a fraction of apercent, but if you want to hold
my money for 30 years, youbetter pay me a whole lot more.
Because I, as the, as the, uh,uh, as the holder of debt, you
got to compensate me for theother things I can do with my
money and the risk of holding mymoney for such a long time.
Speaker 1 (11:24):
So debt investing like bonds is you giving a loan
to a company or a government orwhatever, and they'll pay you
back at the end of the term.
Speaker 2 (11:34):
That's exactly right.
Or, and here's what a lot ofpeople do.
You can trade bonds.
So not only can
Speaker 1 (11:41):
You buy it, it doesn't have to stay with you.
Speaker 2 (11:43):
It doesn't have to stay with you.
Somebody else might pay you morefor it, and you, you might want
to get out it.
So those, you know, so those arethings that the, you know,
people need to pay attention to.
Another category is real estate.
And so for most of us, that's ahouse, but there's lots of forms
(12:04):
of real estate.
There's just owning land.
There's, you know, houses,buildings for self use,
commercial property, rentalproperty, and there's even, um,
um, things called real estateinvestment trusts or, and real
estate ETFs, which essentially amutual fund for, for every list.
Speaker 1 (12:27):
I think a lot of the real estate though is, well, I
mean, yeah, unless you're buyingit, but there's a lot that goes
through inheritance for realestate and there's value in that
too.
Speaker 2 (12:36):
Yeah, absolutely.
Um, but you know what I want,what we want to point out to
people here is that you can, andsome people do, um, buy houses
or buy commercial property to,uh, as a source of income.
So you'll rent, rent, rent itout, um, repeatedly.
(13:01):
Um, and
Speaker 1 (13:02):
Maybe Airbnb, Airbnb is that
Speaker 2 (13:06):
Kind of, kind of, but what I'm in a college town,
you'll have people buying up, um, lots of houses and renting
them out to college students.
And every year more co you know,different college students come
in and they rent them out to me.
Or you can do that in, in yourtown.
Um, there's a lot of peopledoing things like that.
Okay.
(13:26):
Now, if you don't want the, the,the challenge of owning that
property, because now you'reresponsible for all the repairs
and stuff, that's when you wouldget into something like a REIT
where the traded fund that's thetraded fund.
Okay.
All right.
So the next category iscommodities, and everybody is
(13:48):
familiar with that.
That's oil timber, preciousmetals, gold, silver platinum,
and even currencies food andfood products, soybeans, wheat
hugs, things like that.
Speaker 1 (14:03):
Yeah.
Straighten hugs, somebody who'sout there trading Hawks.
Right.
Speaker 2 (14:06):
And, and, and there's a, there's a future skill.
This is where you start gettinginto things like futures,
contracts, delivering.
Speaker 1 (14:15):
Yeah.
I've seen like gold futures andstuff like that.
The 10 year.
Speaker 2 (14:19):
Well, typically the, the best, the easiest way to
describe futures is reallythrough, um, ag agricultural
products.
So the farmer, he knows he's gothis wheat coming in, in, in say
September, but he needs moneynow.
So he sells a contract todeliver a hundred bushels of
(14:44):
wheat in September for setprice.
You as a, as an, as an, uh, agbusiness, you want to lower your
risk.
You don't want to wait untilSeptember to buy all your, all
your wheat.
Cause you don't know what theprice is going to be.
And you need, you know, you needcertain amount of wheat, so you
(15:06):
want to reduce your risk too.
So you're going to have acontract that they get some
wheat in September as well.
And those prices, those contractprices can fluctuate through
through the summer because, Hey,the weather's good.
The weather's bad, the crops,all of those things influence
(15:29):
all of those things influence.
What's going to happen withthose punches.
Okay.
All right.
And now we're going to get intoalternatives and that's a really
loose category.
Includes tangible assets, suchas art wine, antiques stamps.
(15:50):
And what everybody's talkingabout now is, is
cryptocurrencies.
But there's just
Speaker 1 (15:57):
Are the, are the NFTs, the non fungible trade?
[inaudible]
Speaker 2 (16:01):
An alternative.
I would certainly consider thatan alternative
Speaker 1 (16:05):
Asleep because nobody even knows what well, yeah, it
is like, it is like, it's just athing on the internet, but only
you can own it, I guess.
Speaker 2 (16:15):
Uh, yeah.
Speaker 1 (16:16):
That's like the hot new thing, like cryptocurrency
is a hot new thing, but NFTs arelike the hot high, like this is
the, yeah.
This is their moment.
Yeah.
Speaker 2 (16:25):
Yep.
And I'll, uh, and we're goingto, now, we're going to get into
now.
There's the big thing aboutalternatives for me is make sure
you understand what you'reinvesting in and the risks, um,
that will, that will help you.
Um, if not, you're justspeculating and, and, and those
(16:46):
that don't know enough, youknow, have the highest risk of,
of, of, um, of losing and thosekinds of things.
Speaker 1 (16:56):
And also speculation is illegal, right?
Not illegal, highly frowned uponby the sec.
Speaker 2 (17:02):
Well, um, look, there's a lot of markets built
on speculation.
That's true.
Uh, so, um, it's not illegal.
It's no, it's not, uh, it's notillegal.
It's I will just say it's, it'sunwise, but a lot of people
gotten rich on speculation, butthere's a flip side to that for,
(17:25):
for, for, for all of thosewinners, there's probably a
whole lot more losers.
Speaker 1 (17:30):
Let's say 1% winners, 99% losers.
I don't have any data on that.
No data.
This is unfounded.
This is unfounded speculation.
Yeah.
We're doing it right now.
Speaker 2 (17:43):
We're doing it right now.
All right.
And then there's, uh, one lastbucket that, you know, a lot of
people don't consider, uh, as a,as, as an asset class, but I, I
will, because it helps balanceout all this other stuff and
it's cash.
Yep.
Just, just play it all hard cashor cash equivalents and that's
(18:05):
money in the bank, money in anon-risky non, non, um, nothing
sexy, a savings account or, youknow, something that's really
easily convertible to cash
Speaker 1 (18:22):
Like a credit union or something does a credit union
count for that.
I don't know, banks creditunions.
You can do all that stuff.
Yeah.
That's an investment because youget interest back.
That's more money.
I have 2 cents more than I didbefore.
Speaker 2 (18:36):
So the, the bigger issue is, you know, go, go back
to my definition of investment.
Is there risk involved?
Speaker 1 (18:42):
No, not really.
Well, well, yes.
Credit
Speaker 2 (18:48):
And banks have gone bankrupt in the past.
So that is your risk, low risk,but it's low risk.
And in the United States, youhave something called, um, FDI C
something and other things for,um, for credit unions, um, that
essentially ensure, and willallow folks to get their money
(19:10):
back.
Speaker 1 (19:15):
All right.
That's it for our first part ofour investing series, be sure to
join us again.
Next time.
When we go further into theworld of investments, if you
have any questions for us, youcan email
us@efespodcastatgmail.com andfollow our Instagram at E F E S
podcast.
Thank you so much, guys.
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