Introduction to Investing 

By understanding the basics of investing, you can set yourself on the path to financial success.

Women using investment mobile app

Investing when you’re a beginner can be an intimidating task, but it’s a powerful tool for building wealth and achieving your financial goals over the long term. Investing can help you save for retirement, a down payment on a house, or even your child’s education. It can build wealth faster than just saving alone by building your money though compound interest.

Compound Interest

Compound interest is calculated on the amount of your original investment and the interest it accumulates over previous periods. Basically it is “interest on interest”. Compounding allows your investment returns to generate more returns over time which accelerates the growth of your overall portfolio. Even small regular contributions to your investment assets can make a huge impact on your returns in the long run.

Different Asset Classes

The basic principle of investing is to buy assets with the hope of generating income in the future. The assets you can pick from include stocks, bonds, mutual funds, real estate, and several others.

  • Stocks: Represent ownership in a company, offering potential for high returns but also higher risk due to market fluctuations.
  • Bonds: Debt securities issued by governments or corporations, offering steady income through periodic interest payments and lower risk compared to stocks.
  • Mutual funds: Pooled investments in diversified portfolios of stocks, bonds, or other securities, managed by professionals for investors seeking diversification.
  • Real Estate: Investments in properties for rental income or capital appreciation, offering potential for long-term growth but requiring active management.
  • Other Assets: This category includes commodities, exchange-traded funds (ETFs), certificates of deposit (CDs), and alternative investments, each with its own risk-return profile.
    Each type comes with its own risk and return so it's important to pick one that aligns with your goals and risk tolerance.

Risk and Return

Generally, investments, like stocks, with higher potential returns have a higher risk. This means you have a greater chance of making more money but also losing it. Bonds are generally safer, even if they offer a lower return.


A great way to minimize risk is to diversify your investments. By spreading out your investments through different types of assets and industries you can reduce the impact of the risk on your portfolio. Diversification can help improve the consistency of your returns over time by one return making up for another’s potential loss.

How to Start

It’s a great idea to start investing with your local bank. Investing this way grants you personalized service and local market expertise. Remember to consult with a financial advisor before you make your first investment and continue to educate yourself on your investing journey.

The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its subsidiaries and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.