The investing essentials / 01
Stocks, made understandable.
Learn what you own, how returns work, and what to consider before your first investment.
01 / Understand stocks
A small piece of a business.
Buying a stock makes you a part-owner of a company. Your investment can grow in value, but it can also lose value.
You can earn money if you sell for more than you paid. Some companies also pay dividends: cash distributed to shareholders. Neither is guaranteed.
Let’s make it concrete.
A fictional coffee company · not a forecast
You buy 10 shares at $20 each. You’ve invested $200. What happens if the share price changes?
That’s a $50 gain if you sell at this price.
What your shares are worth vs. what you paid
Simplified example. Excludes fees, taxes, and dividends.
Why do stock prices change?
Buyers and sellers respond to company results, expectations, and wider events. A successful business does not guarantee a rising share price.
Common, preferred, growth, value: what’s the difference?
Common and preferred describe share types and their rights. Growth and value describe investing categories. They are different ways of grouping stocks, rather than four mutually exclusive options.
Where can I check U.S. trading hours?
Check the NYSE hours and holiday calendar for regular sessions, holidays, and early closes. Ask your broker about extended-hours availability and restrictions.
Learn more: SEC’s introduction to stocks ↗
02 / Understand the risk
Know the downside, too.
You can lose some or all of the money you put into a stock.
One company can struggle.
Its products, finances, or leadership may disappoint. Shareholders can lose their entire investment if the business fails.
The whole market can fall.
Spreading investments across companies can reduce dependence on any one business. It does not remove the risk of a market decline.
Your timing matters.
Consider when you need the money. Being forced to sell during a downturn can turn a drop in value into a realized loss.
Questions to ask before investing
What is this money for? When will I need it? What would a loss mean for my plans? Do I understand the investment and its costs?
Further reading: SEC’s explanation of stock benefits and risks ↗
03 / Take your next step
Start with a question, not a ticker.
“What am I investing for, and when will I need this money?”
Use that answer to guide your research. You don’t need to learn every market term in one sitting.
Keep these questions handy
What should I ask a broker?
Which account fits my needs? What fees apply? Which investments can I buy? How does customer support work? Verify the firm using FINRA BrokerCheck.
Which terms should I learn first?
Share: a unit of ownership.
Dividend: a distribution to shareholders.
Portfolio: your collection of investments.
Volatility: how much prices fluctuate.
Ready for a deeper dive?
Explore market metrics to learn about earnings and valuation, or return to the Education Center for more topics.