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Start Here If You Are New to Investing

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Here are some of the investments that you can make: stocks, exchange traded fund (ETF), bonds, and certificate of deposit (CD.) The stock market is the place where all stock trades take place. A stock trade is an exchange between a buyer and seller of a certain number of shares of a stock for money. 

The Stock Market

  • There is the Dow Jones, Nasdaq, S&P 500, and Russell 2,000

  • The Dow Jones is a way that the stock market is measured

  • The Dow Jones is measuring the progress of 30 companies across the Nasdaq and New York Stock Exchange

  • The Nasdaq mostly measures tech stocks

  • The S&P 500 measures the 500 largest companies in the USA

  • The Russell 2,000 is measuring medium sized companies

Stocks

  • Big companies like Amazon have stocks. This means that you can buy tiny, tiny parts of the company. Stocks are like pizzas.

  • Companies issue shares. Shares are the tiny pizza slices. You can buy those shares and sell them too. One share (or small part) of Amazon is a few hundred Dollars. There are millions of shares being bought and sold every day for Amazon. 

  • A stock’s volume is how much it is bought and sold in a day.

  • Every stock has a ticker symbol. Amazon’s is AMZN. It’s easier to type AMZN than Amazon. Ticker symbols are like nicknames. People will understand both names. (but ticker symbols are used most of the time with stock buying and selling.)

Here are some types of trades that you can do with stocks:

 

1. Buy on market: Use this to buy stock the most common way. You pay a certain amount of money for a small part of a company. There are a bunch of people that are bidding for a certain number of shares of the stock and you end up selling your shares at the highest bid for the stock. There is also an ask which is the price that the owners of the stock want to sell their shares at. 

 

2. Margin: With this, you can borrow more money than you have and buy more stock than you originally could. There's just one problem. Sometimes there are margin calls. This means that you have to pay back the money that you borrowed (without margin calls, you don't have to pay back the money you borrowed, you just have to sell the stock.)

 

3. Short sell: Short selling is the exact opposite of buying. If you short sell a stock or buy a short of the stock market, you are betting that it will go down, instead of up. This works by borrowing shares from somebody else and immediately selling those shares. When you choose to, you buy back the shares and give it back to the person that you bought the shares from. You then make the difference. In my posts, if I say "this is a short" it means that the thing that I am buying bets that a stock/stock market etc. is going down. Inverse/bear/short are all ways to say that something will go down. (Ex. for Inverse: "This is a -2x inverse.") This means that if stock ___ is being shorted at a -2x inverse, it means that if stock___ goes down $1, the short goes up $2.

 

4. Limit order: If you place a limit order, you are setting a price that you want to sell or buy your shares at in the future. Here's an example: Let's say Apple stock is at $170 and you hope to sell you shares at $170.50---you can then place a limit order for $170.50 and once Apple's stock price reaches $170.50, the shares would automatically be sold for you.  You can also place a limit order if you want to buy a stock for lower than its current price. Another kind of limit order is a sell stop/stop loss. This is when you place an order to sell your shares lower than the stock's price. This kind of trade is done to minimize losses.

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There is also something called futures. You can buy one (or more) future contracts, which is basically a promise to purchase a specific stock at a specific price at a date in the future. For example, you can make a contract promising to buy AMZN (Amazon) on July 25, 2025 (random example) at $xyz. You can look up stock futures which predict how much the market will go up or down based on the contracts that have been made. I use Marketwatch.com to see stock futures and also to see some of the world's other markets.

 

Some stocks pay dividends. This means that the company gives money to the shareholders to reward them. It turns some of the stock gains right in to cash, so you don't have to sell the stock. If a stock pays $5 of dividends, it will probably drop $5 per share the day after the ex div date. The ex div date is the day that you have to hold a stock to receive the dividend. 

Exchange Traded Funds (ETF's)​

  • ETF’s are easy to understand when you know stocks

  • ETF’s are a group of stocks (or other kinds of assets), put together and sold for a single price

  • Look at this ETF example which has shares of Verizon, Coca-Cola, and IBM

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ETF's are traded just like stocks so any one of the trades above can be applied to ETF's too.

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Bonds/Certificate of Deposits (CD's)

  • The government issues bonds.

  • Bonds are also bought and sold like Stocks.

  • CD’s are like bonds, but they are put out by individual banks. CD's are a form of investment that earns interest on a sum of money for a fixed period of time. 

  • Bonds are usually held for years instead of stocks which can be held for days. The amount of time that you are supposed to hold the bond to receive the full amount of money is already predetermined. The end of that is called maturity.

  • The government uses bonds as a loan and they pay back the bondholders interest over time and they promise to pay you a certain amount of money by the bond's maturity.

  • You can sell bonds and CD’s early, but you might not make as much money from selling it as holding it to the end.

  • The bond prices move up and down based off of how much interest the new bonds are paying. Remember, they can move down too.

  • You are guaranteed money with CD’s and bonds as long as the bank doesn’t fail and the government doesn’t run out of money.

 

Bonds are also traded like stocks and ETF's. Again, everything above applies. But instead of the trades being done in the stock market, bonds have their own bond market where only bonds are bought and sold. CD's are trickier though. You can't sell CD's if they are bought directly from a bank, but you can sell them if it is brokered through someone else.

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