It’s Sunday morning, I still have glitter all over my face from last night’s Oxford St makeup, and I’m drinking coffee in bed. The only thing that could make today better is dropping some knowledge bombs on you all.
If you didn’t hear about the Great Disappointment of 2019, last week Mel B told us the Spice Girls were coming to Australia, before clarifying that actually it was just a vague intention.
Anyway, since this Girl Power phenomenon was a huge formative influence on my life, I decided to use them to explain something pretty important: investment concepts.
So, here I give you three important investment concepts they should really teach at school but usually don’t.
Watch: Simple budgeting with a banana. Post continues below.
This is when an investment or asset increases in value over time, without you having to do anything.
Capital Growth is the Spice Girls of the investment world. For that brief moment of joy where we thought the band was touring Australia, my friends and I considered how much we’d pay for tickets. ($1000 was too much, $999 we agreed was OK). Those girls haven’t made an album in decades but they get more valuable over time!
With assets, homes are the most common example of a capital growth play.
We buy them and hope they’ll double in value every seven years and in a rising market, that does happen. But all markets follow a cycle, so if you buy at the wrong time, you may either miss out on capital growth, or see it go backwards. (Read this post for more info).
When people buy shares, they are often looking for capital growth, especially if it’s an up-and-coming company that doesn’t make a profit.
You don’t get any dividends in this case, but hopefully in a few years those $1 shares are worth $5. When I think about it, buying shares is kind of like creating a girl band. They could end up as the Spice Girls, or they could go the way of Bardot (sorry Sophie Monk).