How to Explain Market Investments to Your Family

If you’re an investor, then you may already know that your family will most likely be interested in what you do and how you earn money. Moreover, if your investment strategies have often made you place personal funds or assets as collateral, then you have no other way but to explain to them how the market works.

You could also rely on some family law attorneys if your family believes that you shouldn’t be allowed to toy with money like that. Because let’s be honest, beginner’s introductions to market investments often look shady and far from inspire trust.

But, if you want your family to understand how the market works and what happens to their money, it is undoubtedly worth explaining this matter to them!

The Importance of Personal Finance

First and foremost, it is essential to mention that most people don’t know how to manage their personal finances, even after graduating. As such, some people don’t know how to pay their taxes, how mortgages work, and so on.

While you may be the only investor in the family, your children or spouse could use a bit of information about investments. Why? Well, because such information will make them notice financial opportunities that others may have overlooked. 

Keep in mind that one can invest in more than just the market!

Risks and Rewards

One of the first things you have to explain to your family is how the concept of risk and reward works. The higher the risk, the better the reward. This concept also helps build better decision-making, especially for teens.

It would be best if you didn’t talk about market research, volatility, etc. until you explain to them other concepts such as the ROI (return on investment), for instance. In this case, set clear definitions for what risk and reward mean in market investments.

Investing in Stocks

The market often revolves around stocks. They are one of the first things people will invest in. When explaining to your family how stocks work, you must keep in mind to mention how they come with variable risks and rewards.

While other markets may be less volatile with their risks, stocks are high risk and high reward. Moreover, the risks of the stock market cannot be predicted. The latter is something your family must understand if, for example, you’re asking for advice before making a risky investment. 

Investing is More than Just Buying Stocks

Finally, one has to make their family understand that they don’t just buy stocks or currency aimlessly. But to do so, you must show them the entire process behind an investment.

Namely, the part where you dig up information, look into the market, analyze past events, and predict the market’s future. Let them see that there is more to investing than just clicking buy on a specific stock. 

The Bottom Line

It may be challenging to explain how the market investments work to someone interested in this topic, let alone explaining it to your family.

However, spend extra time explaining the basics of investment, risk, reward, and so on. Then, you’ll have no issue getting into volatility, strategies, bonds, and debt securities, to name a few.

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