Question 1

What is Compound Interest?

Accepted Answer

Compound interest is the interest earned on your initial principal investment plus the interest accumulated over previous periods. Essentially, it is earning interest on top of interest, allowing your savings to grow exponentially over time.

Question 2

What does Liquidity mean?

Accepted Answer

Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its market price. Cash is the most liquid asset, while real estate or fine art are considered highly illiquid.

Question 3

What is Diversification?

Accepted Answer

Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. By spreading your capital across different asset classes, industries, and geographies, you reduce the potential impact of a single underperforming asset.

Question 4

What is Return on Investment (ROI)?

Accepted Answer

Return on Investment (ROI) is a popular financial metric used to evaluate the efficiency or profitability of an investment. It is calculated by dividing the net profit of an investment by its original cost, expressed as a percentage.

Question 5

How does Inflation impact my money?

Accepted Answer

Inflation is the gradual decrease in the purchasing power of a currency over time, usually reflected in a general rise in prices for goods and services. If your money does not grow at a rate equal to or higher than inflation, its real value declines.