How Investing Works

01

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Bull and bear markets describe the direction the market is moving. Here is what each one means and how to think about them.

02

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Volatility describes how much and how quickly prices move. Here is what it means for you as an investor.

03

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Risk tolerance is how much uncertainty you can handle as an investor. Getting this right is one of the most important things you can do.

04

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Risk management is deciding, in advance, how much you are willing to lose. Here is what that looks like for an individual investor.

05

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You do not need thousands of dollars to start. Here is what actually matters when you are getting started with a small amount.

06

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A watchlist helps you track companies you are interested in before you decide to buy. Here is how to build one and why it matters.

07

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An ETF lets you buy a basket of investments in a single trade. It is one of the most useful tools available to ordinary investors.

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A mutual fund pools money from many investors to buy a collection of assets. Here is how it works and who it is designed for.

09

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ETFs and mutual funds are both ways to invest in a collection of assets. Here is how they differ and which might suit you better.

10

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Investment fees are one of the biggest factors in your long-term returns. Here is what to look for and why it matters more than most people realise.

11

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A dividend is a payment a company makes to its shareholders out of its profits. Here is how dividends work and why they matter.

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Compound interest is the process of earning returns on your returns. It is one of the most powerful forces in investing.

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Dollar cost averaging means investing a fixed amount regularly, regardless of what the market is doing. Here is why it works.

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Diversification means spreading your investments across different assets to reduce risk. Here is why it is one of the most important principles in investing.

15

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Asset allocation is how you divide your portfolio between different types of investments. It is one of the most important decisions you will make as an investor.

16

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Investing for retirement means thinking in decades, not months. Here is how a long time horizon changes the way you invest.

17

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Passive investing tracks the market. Active investing tries to beat it. Here is what the difference means in practice and what the evidence says.

18

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Value investing means buying stocks that appear to be trading below what they are actually worth. Here is the idea behind it and where it comes from.

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Growth investing focuses on companies expected to grow faster than the market. Here is how it works and what makes it different from value investing.

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Sustainable investing weighs environmental, social, and governance factors alongside financial returns. Here is what that means in practice.

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Not all investing information is created equal. Here is how to separate reliable sources from noise.

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An annual report is a document a company publishes every year to explain how it has performed. Here is what it contains and why it matters.

23

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A 10-K is the formal annual financial filing that American public companies submit to the SEC. Here is what it contains and why investors use it.

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An earnings report tells you how a company performed financially over the past quarter. Here is what it contains and why markets react so strongly to it.

25

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Revenue and profit are both measures of a company's financial performance, but they tell very different stories. Here is how to tell them apart.

26

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Knowing when to buy a stock is only half the job. Here is a framework for deciding when it actually makes sense to sell.

27

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Most investment losses come from investor behavior, not from the market itself. Here are the most common mistakes and how to avoid them.

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Mr. Market is a metaphor created by Benjamin Graham to explain how the stock market behaves. It is one of the most useful ideas in all of investing.