From Saving to Investing: What You Actually Own
What do you actually own when you invest?
In brief
Investments are claims on something: a company’s profits (shares), a borrower’s promise (bonds), property, or pooled funds. Knowing what you own explains how it behaves.
Key ideas
Own or lend
Shares make you an owner; bonds make you a lender. They respond differently to events.
Make an insight card →Funds pool and spread
Funds make diversification easy but add costs; check what is inside.
Make an insight card →Liquidity matters
Assets you can sell quickly are more flexible but not necessarily safer.
Make an insight card →Try it
The quiet tax
Inflation never sends a bill. It makes each unit of money buy a little less every year. Compare idle cash with money that earns a return.
Open the full page: formula, variables, worked example and cautions →
Red flag
A product whose underlying investment you cannot explain.
Ask before you sign
- What exactly do I own, and who holds it?
- How quickly can I sell, and at what cost?
Do this week
Read the factsheet of your largest fund.
Try it · 10–45 minutes
List each investment you hold and write one sentence on what it owns.
Connected ideas
Where else this shows up
Pause and reflect
Private to this device. Nothing is sent anywhere.
Words worth knowing
- Equity (shares)
- Part-ownership of a company. Also called stock or shares.
- Bond
- A loan you make to a government or company, which promises to pay interest and return your money at a set date.
- Fund
- A pooled investment in which many people’s money is invested together by a manager.
- ETF (exchange-traded fund)
- A fund that holds many investments and trades on an exchange like a share. Many track an index at low cost.
- Yield
- Income from an investment as a share of its price.
- Liquidity
- How quickly and cheaply something can be turned into cash without losing value.
- Asset allocation
- How an investment portfolio is divided between kinds of assets, such as shares, bonds and cash.
Companion notes written for this website, based on the topics of Chapter 19. They explain ideas and do not reproduce the book. General information, not personal advice.