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Finance From A to Z: Week 1 (A)

Finance From A to Z: Week 1 (A)

A Financial Initiative: 

Before we dive into our A-Z series, we would like to highlight a financial initiative taken by the education system in North America to close the gap in financial literacy.

Statistics show that only a third of Americans are familiar with basic financial concepts. Only 24 percent of millennials have a basic understanding of finance in North America.

The issues are basic, but very relevant, as they stem from their inexperience with taxes, mortgages, bank accounts, and investing.

Thus, there is a great emphasis on having personal finance programs in the education system to teach youth about the basics of finance and to help them deal with real-life financial challenges. 

Furthermore, personal finance education is now required for graduation in North America. Though there are still pending decisions in some states or provinces related to the implementation, progress is still being made. 

So, what's the development so far? Governments and educators alike are committed to establishing a strong foundation for kids' financial education.

Likewise, we, at Explorer Hop, have clear goals in empowering the change-makers of tomorrow! 

Today's edition focuses on the letter A: for Asset Allocation and Alt-coins. The important A's in the world of finance.

A is for Asset Allocation:

Assets are resources with economic value and future incentives. 

When it comes to investing, having a solid understanding of portfolio diversification is crucial. 

There are three main asset classes: stocks, bonds, and cash equivalents. Stock investments represent ownership whereas bond investments represent debts. 

The allocation of assets is a component of an investment strategy and improves risk mitigation by diversifying. 

Factors such as risk tolerance, goals, and time frame to invest determine an investor's portfolio. Speaking of risk tolerance and volatility, now, we also have futures and cryptocurrencies in the asset class mix. 

Cryptocurrencies are digital assets that were created with the intent to manage money without relying on financial institutions. We are familiar with Bitcoin, for obvious reasons, as it was the first cryptocurrency (launched in 2009).

Hasn't the market always been a place where products coexist despite competitive forces and find buyers because of their exclusivity?

A is for Alt-coin:

Alt-coin, an alternative cryptocurrency, joined the A’s of finance in 2011. Any cryptocurrency other than bitcoin is an alt-coin.

Litecoin, Dogecoin, Ethereum, and Stellar are some examples. The purpose of an alt-coin is not just limited to digital payments. In fact, every alt-coin’s purpose is dependent on the goal of its developer. 

They are an essential part of a crypto portfolio that comes with a lot of risks and rewards. Finding the right blend of assets determines one’s potential gains or losses. 

The decision to invest in crypto versus traditional assets entirely depends on one’s risk appetite and the correlation between time period and high returns.

Some fun facts:

  • Dogecoin, an alt-coin, was created in 2 hrs and became a popular meme in 2013.
  • Space X will soon accept Dogecoin as a payment option for merchandise. Tesla only accepts dogecoin crypto as a payment method.
  • There are more than 5k alt-coins created worldwide

Thank you readers and let us know in the comment section what caught your interest in this edition! See you next Wednesday :)

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