Investment finance basics: assets, liquidity and volatility
Getting started in the world of investments can be overwhelming without adequate knowledge and therefore, knowing some basic concepts is vital for a better understanding of the financial world and, thus, improving decision-making related to your investment portfolio.
For this reason, at BBVA New Gen we have prepared this group of basic investment concepts to give new investors the boost they need to start investing their capital.
There are three concepts that are constantly repeated when it comes to investing: assets, liquidity, and volatility. These being the most common, they are some of the most important to understand.
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What are assets?
According to the dictionary of the Royal Spanish Academy, a financial asset is a “title that represents for its holder rights over property or income, and that is a liability for the agent that has issued it.”
These assets are acquired with the intention of obtaining a profit, which may or may not be economic.
What is liquidity?
The liquidity of the assets is important to take into account since it represents the quality that an asset has of being able to be transformed into cash in a short period of time and without its price being diminished.
This concept is particularly important as it tells the investor how easy it is to get the money invested and how quickly he can do it. Therefore, hearing that a market is very liquid translates into a market with a high number of transactions, which facilitates the sale or exchange of your assets.
What is volatility?
When investing, knowing the volatility of your investment is of vital importance to determine its level of risk.
According to the dictionary of the Royal Spanish Academy, volatility refers to “price instability in financial markets.” An investment that is recognized as an investment with high volatility will be one whose prices change constantly, thus translating into high risk. However, it can be highly profitable.
First step completed
There are many other basic concepts that are very important to get started in the financial world. However, these three basic concepts are the first step to start investing your money in companies that are of interest to you, whether for pleasure, ideals, stocks or others.
There is a suitable investment for everyone and BBVA New Gen has all the necessary tools to bring you closer to them.
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