Sometimes companies new to the stock market will have a ‘float’ – there will be an initial public offering of shares. This might be when a private company goes public in order to raise money for expansion. It might also happen when a formerly government-owned company is listed on the stock market. Readers might remember when Facebook first went public and floated on the stock market in 2012.
These tend to be risky investments as the value of the as-yet untraded shares is still uncertain. When we get to the part on how to invest in shares, I will not recommend specifically buying newly-floated shares.
Jargon: Shares can also be called ‘stocks’ or ‘equities’. Together with bonds, they can be called ‘securities’ because they can be sold on to third parties. Purchasing shares means to own a part-share of a company, as opposed to lending a company money as with bonds. If you bought 100% of all Toyota shares, you would own Toyota. I expect that my readers will only own tiny little slivers of many different companies.
Growth assets, as the name suggests, are the ones that will actually grow your wealth over time according to the magic of compounding returns, which we’ll explain in detail soon.
This is the sharp end of investing. In order to reach Financial Freedom Levels 3 (could work part time) or 4 (could cease working altogether), even if just for retirement in old age without depending on a precarious government pension, you will need to hold plenty of growth assets over a long period of time.
This chapter will explain how shares work and how best to invest in them. We will also examine alternative growth assets such as real estate, peer-to-peer lending, laundromats and royalties.
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.[i]
I couldn’t be any clearer than Investopedia. Remember to refer to that site whenever you get confused. See how good it is?
There are many different cryptocurrencies on the market and many more will arrive in the future. The biggest, of course, is bitcoin. The second largest is Ethereum. Each is based on a different algorithm and works in a different way.