Golden Rule - Summary

You should now be in a position to understand the basics of opportunity cost, compounding, risk and portfolio theory. Whilst these ideas are derived from economic theory, they can help you understand the background to owning a portfolio of shares.

There are two main points to bear in mind. The earlier you start investing, the greater the gains you stand to make in the long run. Also, the more diversified your portfolio; the less likely you are to be exposing yourself to unnecessary risk.

It is important that private investors have a strategy towards their investments. This should reflect the returns they expect, and the risks they are prepared to take.