Start here: investing essentials
Follow these articles in order, or open any explanation on its own. Each step includes examples and a question to check your understanding.
Browse the full library →- Step 1 · Concept explained
What Is a Stock?
A stock represents an ownership interest in a company. Its price is what buyers and sellers currently agree to exchange that interest for; ownership does not promise a dividend, a fixed repayment or a profit.
- Step 2 · Concept explained
What Is a Bond?
A bond is a debt security. Its issuer borrows money under stated terms that may include interest payments and repayment of principal at maturity. Those promised payments are subject to the issuer’s ability to pay and the bond’s specific conditions.
- Step 3 · Concept explained
What Is an ETF?
An exchange-traded fund pools investor money into a portfolio and issues shares that trade on an exchange. The wrapper tells you how it is held and traded; the holdings and strategy tell you what risks it takes.
- Step 4 · Concept explained
What Is a Market Index?
A market index is a rules-based measurement of a selected group of securities. It summarizes a defined basket rather than every investment in the world, and its weighting and return rules shape the result.
- Step 5 · Concept explained
How Compound Returns Work
Compounding means each period’s return applies to the value left by earlier periods. Multi-period investment returns multiply together; they usually cannot be found by simply adding the percentages.
- Step 6 · Concept explained
Risk and Expected Return
Expected return is an estimate of possible future outcomes, often summarized as a probability-weighted average. Investors may require compensation for taking risk, but taking more risk does not guarantee receiving a higher return.
- Step 7 · Concept explained
What Diversification Does
Diversification spreads exposure across investments whose outcomes are not identical. It can reduce dependence on one issuer or source of risk, but it does not guarantee a profit or prevent losses across an entire market.
- Step 8 · Concept explained
Investment Fees and Expenses
Investment costs can include fund expenses, advisory fees, transaction charges, spreads and other implementation costs. Their effect includes both the money paid and the future growth that money no longer earns.