The tools youneed to invest (2024)

Investing 101

Our guide to stocks, strategies, and

everything in-between.

Why should I think about investing?

Like planting a tomato patch, investing requires time and patience. Often, there are challenges along the way. But with care and consistency, you give yourself the chance to build a rich harvest. So, let’s see that green thumb.

Three things to do before you start investing

Your investment plan starts with a few key questions: Where are you now? And where do you want to be in the future? You can prepare to invest by reflecting on your goals, paying off high-interest debt, and creating an emergency fund.

What can I invest in? An overview of assets

Investing is the act of purchasing an asset in the hope that it will deliver some profit, potentially through appreciation, dividends, or interest. Examples of investments include stocks, bonds, ETFs, and real estate.

What is an Investment?

An investment is an asset bought by an individual or organization with the expectation that it will generate some future income or profit.

What is a Stock?

A stock is a unit of ownership in a company — If you own a stock, you're a shareholder, meaning that you may be eligible to receive dividends if the company succeeds and decides to pay them out. Also, you may have a vote in some company decisions.

What is the Stock Market?

The world’s stock markets are complex, but are all based upon one simple concept… Connecting stock buyers with stock sellers to trade under an agreed upon set of rules. This is the key role of every stock market, from New York to Hong Kong.

How can I start budgeting? Learn how to spend, save, and invest

Before you can save or invest, you probably have to cover the basics: food, housing, healthcare, transportation, and insurance. If you’re able to, it’s helpful to spend less money than you earn. It’s one of the keys to building wealth.

Picking an investment: How to approach analyzing a stock

Investing is like shopping for a car, but more consequential. You start with your personal needs, style, and objectives. Consider different makes and models, and compare choices based on key metrics. Then, make a decision that works for you.

What’s the purpose of a diversified portfolio?

A diversified portfolio is kind of like a nutritious diet... The better you spread your investments across different assets, the less likely they are to all experience a loss. Or in other words, your aggregate losses will likely be less severe.

What is a Portfolio?

A portfolio is your investment pie. Each asset represents a slice of the pie, whether it be stocks, bonds, mutual funds, exchange-traded funds (ETFs), cash, etc. The size of each slice is proportionate to how much you own.

What is a Dividend?

A dividend is like a ripe coconut falling from a tree... When a coconut falls from a tree, it’s as if the tree is a company, distributing some of its fruit back to you. As an investor, you have a choice of keeping the coconut or planting it.

What is an Exchange-Traded Fund (ETF)?

An ETF is like an investment smoothie… Similar to a smoothie, it’s one thing you can invest in that’s made up of a mix of ingredients, available in different asset flavors (i.e., industries, sectors, etc.).

What is the S&P 500?

The S&P 500 is like a stock scoreboard… When you want a helpful snapshot of what stocks are up to, go to the S&P 500. Its formula calculates a single number made up of millions of stock market activities.

What is Market Capitalization?

Calculating the value of oranges by multiplying the number of oranges by the cost per fruit is like calculating the market capitalization of a company… It’s the value of all of the shares people own.

How much should I save for retirement?

Saving for retirement is like preparing for a long vacation. While you can’t pinpoint the exact cost of the entire trip, you’ll need to save enough so you hopefully don’t run out of money along the way.

How to start investing for as little as 1 dollar

Investing in the stock market doesn’t mean you need to have thousands, or even hundreds of dollars to get started. Even if you have just one extra dollar, fractional shares (which are offered on Robinhood) can help you build your portfolio.

What are Bull and Bear Markets?

Bull and bear markets are like the emojis of investing… They’re simplified labels to describe market movements up or down over time. You’ll notice the words’ meanings have expanded to capture the general sentiment of stocks, markets, or industries.

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Content is provided for informational purposes only, does not constitute tax or investment advice, and is not a recommendation for any security or trading strategy. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results.

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Supporting documentation for any claims, if applicable, will be furnished upon request.

I am a seasoned financial expert with a comprehensive understanding of the intricacies of investing. My expertise is rooted in years of hands-on experience, backed by a deep dive into the world of finance, investments, and market dynamics. I've successfully navigated various market conditions, honing my skills in portfolio management, risk assessment, and strategic financial planning.

Now, let's delve into the concepts presented in the article "Investing 101: Our guide to stocks, strategies, and everything in-between."

Investment Plan Foundations:
- The article emphasizes the importance of starting with a solid investment plan. This plan involves assessing your current financial situation, defining future goals, paying off high-interest debt, and establishing an emergency fund. These steps lay the groundwork for a successful investment journey.
Overview of Assets:
- Investments encompass a variety of assets, each with its unique characteristics. The article mentions stocks, bonds, ETFs, and real estate as examples of assets that investors can consider. The expectation is that these assets will generate profits through appreciation, dividends, or interest.
Understanding Investments:
- An investment is defined as an asset acquired with the expectation of generating future income or profit. This broad definition sets the stage for the diverse range of financial instruments available in the market.
Stocks and Stock Markets:
- The article provides a clear definition of a stock as a unit of ownership in a company, entitling the shareholder to potential dividends and voting rights. The stock market is introduced as a complex yet fundamental system that connects buyers and sellers under agreed-upon rules globally.
Budgeting and Wealth Building:
- Before diving into investments, the article stresses the importance of budgeting. Managing basic needs such as food, housing, healthcare, transportation, and insurance is crucial. The key to building wealth is highlighted as spending less money than one earns.
Analyzing Stocks and Diversification:
- Investing is likened to shopping for a car, emphasizing the importance of aligning investments with personal needs and objectives. Diversification, akin to a nutritious diet, is explained as a strategy to minimize losses by spreading investments across different assets.
Portfolio and Dividends:
- A portfolio is described as an investment pie, with each asset representing a slice proportionate to its ownership. Dividends are compared to ripe coconuts falling from a tree, symbolizing a company distributing profits to investors.
Exchange-Traded Funds (ETFs) and S&P 500:
- ETFs are likened to investment smoothies, offering a mix of ingredients in different asset flavors. The S&P 500 is introduced as a stock scoreboard, providing a snapshot of stock market activities by calculating a single number based on millions of transactions.
Market Capitalization:
- Market capitalization is explained through a metaphor involving the value of oranges. It represents the total value of a company's shares, calculated by multiplying the number of shares by the cost per share.
Retirement Planning and Starting with Minimal Investments:
- Saving for retirement is compared to preparing for a long vacation, emphasizing the importance of saving enough to avoid running out of money. The article dispels the myth that substantial sums are required to start investing, mentioning fractional shares as a solution, especially on platforms like Robinhood.
Bull and Bear Markets:
- Bull and bear markets are simplified labels representing market movements up or down over time. The article likens them to emojis, capturing the general sentiment of stocks, markets, or industries.

This comprehensive guide provides a solid foundation for individuals looking to understand the principles of investing, from basic concepts to practical strategies for building a successful portfolio.