Investing Basics
Educational articles about investing basics.
Subcategories
Foundations of Investing
20 articles
Behavioral Finance
22 articles
Evaluating Investments
19 articles
Investment Vehicles
11 articles
Investor Personas
10 articles
Market Mechanics
20 articles
Personal Finance Prep
0 articles
Portfolio Basics
21 articles
Taxes and Regulations
0 articles
Toolkits and Calculators
0 articles
Articles
Glossary of Foundational Investing Terms
Financial terminology creates barriers for new investors. **This glossary defines 25 foundational terms you'll encounter when building portfolios, rea...
The Opportunity Cost of Holding Excess Cash
Cash feels safe. It doesn't fluctuate, doesn't "lose" value on your statement, and provides comfort during market volatility. But **holding cash beyon...
Compound Interest: Taxable vs Tax-Advantaged Accounts
**You contribute $7,000 to an IRA and a taxable brokerage account annually for 30 years at 8% returns**—the IRA reaches $817,000 while the taxable acc...
Building a Simple Efficient Frontier
Most investors pick portfolios based on gut feeling about how much stock exposure feels right. **The efficient frontier eliminates guesswork** by show...
Understanding Real vs Nominal Returns
**Your portfolio returned 10% last year and you celebrated a $10,000 gain on your $100,000 balance**—but inflation ran 3%, meaning your purchasing pow...
Risk Premiums Across US Asset Classes
**You allocate your portfolio 60% stocks and 40% bonds instead of 100% bonds, accepting higher volatility (18% standard deviation vs 6%) in exchange f...
How Economic Cycles Affect Investment Outcomes
**Your portfolio's performance depends less on stock picking than on which phase of the economic cycle you're invested in**. Stocks average **+20% ann...
Inflation-Protected vs Traditional Savings: TIPS and I Bonds Explained
**Cash in a typical savings account loses ~2.2% real purchasing power annually** when inflation runs at 2.7% and your account pays 0.5% interest. Over...
Behavioral Pitfalls Every New Investor Should Recognize
**New investors consistently sell winners too early and hold losers too long**—a pattern called the disposition effect that costs ~1-2% annually in un...
Essential Checklist Before Opening Your First Brokerage Account
**Opening a brokerage account before establishing emergency savings forces you to sell investments at losses when unexpected expenses hit**—which dest...
How US Brokerages Are Regulated
When you hand $50,000 to a brokerage firm, **you're trusting that firm won't disappear with your money**. The US regulatory system creates a three-lay...
Reading Financial News with a Critical Eye
**Financial media earns revenue from your attention, not your portfolio returns.** A headline screaming "MARKET CRASHES!!" for a -1.5% day generates m...
Dollar-Cost Averaging vs Lump Sum: What History Shows
You receive a $50,000 windfall—inheritance, bonus, house sale proceeds—and face the immediate question: invest it all today (lump sum) or spread purch...
Custodial Accounts UTMA and UGMA Basics
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Direct Indexing for Tax Management
# Direct Indexing for Tax Management What if you could own the SP 500 but harvest tax losses on individual stocks throughout the year? That is direct...
Brokered CDs and TreasuryDirect Accounts
# Brokered CDs and TreasuryDirect Accounts Want guaranteed returns with government backing? **I Bonds** currently pay **4.03%** (November 2025 - Apri...
Target-Date Funds Glide Paths and Costs
# Target-Date Funds: Glide Paths and Costs Target-date funds manage over **3 trillion in assets** because they solve the hardest problem in investing...
Index Funds vs. Actively Managed Funds
# Index Funds vs. Actively Managed Funds Over 20 years, **94.1% of domestic equity funds** underperformed their benchmarks (SPIVA, 2024). This is not...
Comparing ETFs Mutual Funds and Closed-End Funds
# Comparing ETFs, Mutual Funds, and Closed-End Funds In 2024, only **5% of ETFs** distributed capital gains to shareholders compared to **43% of mutu...
Brokerage Account Types Individual Joint and Trust
# Brokerage Account Types: Individual, Joint, and Trust How you title your brokerage account matters more than most investors realize. The wrong stru...
Solo 401(k)s and SEP IRAs for Self-Employed Investors
# Solo 401(k)s and SEP IRAs for Self-Employed Investors Self-employment offers many freedoms, but retirement saving is not one of them - **you must b...
Late Starter Catch-Up Investing Guide
## Why It Matters The typical American has only **$87,000 saved** for retirement, and many people in their 50s and 60s have less than **$200,000** to...
Traditional IRA vs. Roth IRA Rules
The Traditional vs. Roth IRA decision shows up in portfolios as **choosing the wrong account for your tax trajectory**, **missing contribution deadlin...
401(k) and 403(b) Employer Plans Explained
Employer retirement plans show up in portfolios as **free money left on the table** (when you skip the match), **tax-deferred compounding ignored** (w...
Taxable Brokerage Accounts vs. Retirement Accounts
The account you invest in matters as much as what you invest in. Most investors focus entirely on picking funds while ignoring **account selection**—a...
Small Business Owner Investment Playbook
Small business owners face a unique investment paradox: **you generate wealth through concentrated business risk** but must build retirement security ...
Military Family Investment Benefits
Military families have access to investment benefits that most civilian investors can only envy - **expense ratios under 0.06%**, **automatic 5% emplo...
Glossary: Investor Persona Terms
This glossary covers terms you'll encounter when planning investments around your life stage, career profile, or specific circumstances. Bookmark it f...
Retiree Income Management Blueprint
## Why It Matters The transition from accumulating wealth to **spending it down** is one of the most significant financial shifts you'll make. Rese...
Caregiver Financial Planning Considerations
## Why It Matters Family caregivers provide an estimated **$600 billion annually** in unpaid care (AARP, 2023). The financial toll is significant: ...
High-Net-Worth Family Office Basics
## Why It Matters At certain wealth levels, standard financial advice breaks down. A family with **$25 million+** in investable assets faces challe...
Values-Based and ESG-Focused Investor Guide
## Why It Matters Roughly **$17 trillion** in U.S. assets now incorporate environmental, social, or governance (ESG) factors—up from $8 trillion a ...
DIY vs. Advisor Decision Framework
## Why It Matters Americans pay roughly **$100 billion annually** in investment advisory fees (Cerulli Associates, 2023). For a typical 1% AUM fee ...
Pre-Retiree Portfolio Simplification Steps
## Why It Matters Pre-retirees typically accumulate **5-8 different investment accounts** across careers—old 401(k)s, IRAs, taxable brokerage accou...
How Federal Reserve Rate Decisions Move Your Portfolio
The Federal Reserve controls the federal funds rate—currently **3.50-3.75%** (down from a **5.33% peak** in 2023, Source: Federal Reserve FOMC Decembe...
Why Investing Matters for US Households
Households holding excess cash beyond emergency funds watch purchasing power erode while **missing the single most reliable wealth-building mechanism ...
Time Value of Money (Treasury Examples)
You're offered $1,000 today or $1,000 in five years. **Every rational investor takes the immediate payment** (because money available now can be inves...
How Inflation Eats US Savings
You check your savings account and see $50,000 (same balance as five years ago). You feel prudent. **You're losing purchasing power at 2-3% annually w...
Correlation 101: How Asset Relationships Shape Portfolio Risk
Stocks and bonds had **-0.3 to -0.5 correlation** during 2000-2020 (moved in opposite directions, Source: Russell Investments correlation analysis), w...
Volatility and Standard Deviation: Measuring Investment Risk
The S&P 500 averaged **10.38% annual returns** (1926-2025) with **18% standard deviation** (volatility, Source: historical market data). That means in...
Diversification Basics: Why Stocks + Bonds Outperform Stocks Alone
A **100% stock portfolio** returned **10.38% annually** from 1926-2025 with **18% volatility** (wild annual swings from **-37% to +54%**, Source: S&P ...
Case Studies of Behavioral Mistakes in US Markets
**Difficulty:** Intermediate **Published:** 2025-12-28 ## Summary This article presents 4 quantified case studies showing measurable behavioral erro...
Availability Heuristic in Market Crashes
**Intermediate** | Published: 2025-12-28 ## Why It Matters Availability heuristic—the tendency to **judge probability of events by the ease with...
Core Asset Allocation Models for US Investors
**Difficulty:** Intermediate **Published:** 2025-12-28 Asset allocation determines 93.6% of portfolio return variation over time, dominating secur...
Designing a Three-Fund Portfolio
**Difficulty:** Intermediate **Published:** 2025-12-28 The three-fund portfolio delivers global diversification across 21,600+ securities using ex...
Adding Bonds to Reduce Volatility
**Difficulty:** Intermediate **Published:** 2025-12-28 Adding 20% bonds to a 100% stock portfolio reduces volatility from 18.5% to 14.7% (20.5% re...
Role of Cash and Short-Term Instruments
**Difficulty:** Intermediate **Published:** 2025-12-28 Cash serves three legitimate portfolio functions: emergency reserves (3-6 months expenses),...
How to Select US Equity Index Building Blocks
**Difficulty:** Intermediate **Published:** 2025-12-28 Total US stock market index funds deliver 99.5% market coverage across 3,700 stocks using s...
International Exposure Decisions for US Investors
**Difficulty:** Intermediate **Published:** 2025-12-28 International stocks represent 44% of global market capitalization across 8,000 companies i...
Incorporating Real Assets and Alternatives
**Difficulty:** Advanced **Published:** 2025-12-28 Real assets (REITs, commodities, gold) and inflation-protected securities add complexity to por...
Rebalancing Rules: Frequency and Tolerance Bands
**Difficulty:** Intermediate **Published:** 2025-12-28 Annual rebalancing with ±5 percentage point tolerance bands delivers 99% of returns versus ...
Risk Budgeting and Position Limits
**Difficulty:** Advanced **Published:** 2025-12-28 Single stock concentration creates 50-70% higher volatility versus diversified portfolio, with ...
Dollar-Cost Averaging Implementation Guide
**Difficulty:** Intermediate **Published:** 2025-12-28 Lump-sum investing outperformed dollar-cost averaging in 68% of rolling 12-month periods ac...
Tax-Efficient Asset Location Basics
**Difficulty:** Beginner **Published:** 2025-12-28 Optimal asset location adds 0.20% to 0.75% in annual after-tax returns by placing high-tax inve...
Building Income-Focused vs Growth Portfolios
**Difficulty:** Intermediate **Published:** 2025-12-28 Growth portfolios outperformed income portfolios by 1.3% annually from 2000 to 2023, compou...
Stress Testing Portfolios Against Market Scenarios
**Difficulty:** Intermediate **Published:** 2025-12-28 Portfolio stress testing during the first 5 years of retirement predicts 30-year success wi...
Creating IPS (Investment Policy Statement) Templates
**Difficulty:** Intermediate **Published:** 2025-12-28 Individual investors with written Investment Policy Statements achieve **2.4% higher annual...
Evaluating Model Portfolios vs DIY
**Difficulty:** Intermediate **Published:** 2025-12-28 Model portfolios via robo-advisors (0.25% fee) outperformed the average DIY investor by **1...
How to Use Target-Date Funds as Core Holdings
**Difficulty:** Intermediate **Published:** 2025-12-28 Target-date fund users achieved **90% of their retirement savings goals** versus **67% for ...
Factor Tilts: Value, Quality, Momentum Basics
**Difficulty:** Beginner **Published:** 2025-12-28 Small-cap value stocks outperformed large-cap growth by **5.2% annually** from 1927-2015 (Fama ...
Using ETFs for Sector Bets Responsibly
**Difficulty:** Intermediate **Published:** 2025-12-28 Tactical sector bets underperformed balanced portfolios by **-1.8% annually** after fees fr...
Tracking Performance vs. Benchmarks
**Difficulty:** Intermediate **Published:** 2025-12-28 Portfolios without defined benchmarks underperformed appropriate benchmarks by **1.2% annua...
Glossary: Portfolio Construction Terms
**Difficulty:** Beginner **Published:** 2025-12-28 This glossary defines 28 essential terms for building and managing diversified portfolios. Each...
Dividend Sustainability Checks
**The practical point:** You don't need to guess if a dividend will be cut—companies with payout ratios above **80%** have a **3.2x higher** probabili...
Reading Income Statements for Key Trends
- **Difficulty:** Intermediate - **Published:** 2025-12-28 The practical point: **an income statement is a trend document**, and the trends th...
Balance Sheet Strength Indicators
The practical point: **you want a balance sheet that can survive a 90-day revenue shock without forcing dilution, fire-sale assets, or a covenant brea...
Cash Flow Statement Signals Investors Should Watch
The practical point: **you trust earnings at 1× only after you verify cash at 3×—operating cash flow, free cash flow, and working-capital efficiency.*...
Profitability Ratios: Margins, ROE, ROIC
# Profitability Ratios: Margins, ROE, ROIC - **Difficulty:** Intermediate - **Published:** 2025-12-28 The practical point: **a 24% ROE can be "...
Valuation Multiples Overview: P/E, EV/EBITDA, P/S
The practical point: **a multiple is a price you pay today for 1 unit of a business metric over the last 12 months (TTM)**—and your return over the ne...
Growth Metrics: Revenue CAGR, Same-Store Sales
The practical point: **a reported 18% revenue CAGR can be "real" and still be low-quality if only ~13.8% is organic and same-store sales decelerate fr...
Analyzing Expense Ratios and Fund Costs
The practical point: **a "small" 0.77% annual fee gap (77 bps) can compound into a $451,000 difference over 30 years** on a $150,000 starting balance ...
Comparing ETF Tracking Difference and Error
**The practical point:** if your ETF lags its index by **0.10% per year**, you are accepting a cost that is roughly **$2,000 per $100,000 over 10 year...
Credit Ratings and Outlooks Explained
The practical point: **a 1-notch rating move can change your 5-year default odds by multiples and your bond's spread by 15–200 bps**, so you treat rat...
Qualitative Factors: Management and Governance
# Qualitative Factors: Management and Governance The practical point: **a 2-point move in governance quality can be worth ~8.5% per year in risk-ad...
Moats and Competitive Advantage Frameworks
# Moats and Competitive Advantage Frameworks **Difficulty:** Intermediate **Published:** 2025-12-28 The practical point: you are underwriting *...
Using 10-Ks, 10-Qs, and 8-Ks Effectively
# Using 10-Ks, 10-Qs, and 8-Ks Effectively **Difficulty:** Intermediate **Published:** 2025-12-28 The practical point: you're trying to convert...
Red Flags in Promotional Investor Decks
# Red Flags in Promotional Investor Decks **Difficulty:** Intermediate **Published:** 2025-12-28 The practical point: **a deck can be "true" an...
Scenario Analysis for Revenue Drivers
The practical point: **A 10% miss in 1 key revenue driver can shift Year 3 revenue by $6.7M in a $67M business**, which is large enough to swing an ac...
Checklist for Evaluating Investment Newsletters
The practical point: if you can't **verify** a newsletter's edge to at least **+1.5% annual alpha** after **(1) trading friction, (2) factor exposure,...
Overconfidence Bias in Bull Markets
**Intermediate** | Published: 2025-12-28 ## Why It Matters Overconfidence shows up most dangerously after winning streaks: **you attribute skill...
How to Vet Financial Data Sources
The practical point: **you are not buying "data," you are buying an error distribution**, and the difference between **14.2%** and **1.6%** bad observ...
Building a Simple Valuation Model in a Spreadsheet
The practical point: **in a standard DCF, a 1.0 percentage-point change in terminal growth can move your valuation by ±15–25%**, so your spreadsheet i...
Anchoring on Purchase Price Mistakes
**Intermediate** | Published: 2025-12-28 ## Why It Matters Anchoring on purchase price—the tendency to evaluate stocks relative to what you paid...
Confirmation Bias in Stock Research
**Intermediate** | Published: 2025-12-28 ## Why It Matters Confirmation bias—the tendency to seek, interpret, and remember information that conf...
Herd Behavior During Market Manias
**Intermediate** | Published: 2025-12-28 ## Why It Matters Herd behavior—the tendency to follow the crowd rather than independent analysis—shows...
Documenting a Thesis and Monitoring Triggers
The practical point: **Write a 1-page, date-stamped thesis at least 24 hours before you buy**, attach **≥5 triggers (3 fundamental + 2 price-based)**,...
Accountability Partners and Investment Clubs
**The practical point:** You won't call your accountability partner when you're confident you're right—which is exactly when you need to call them mos...
Planning Responses to Big Market Moves
**The practical point:** Planning your crash response in February (calm) prevents panic paralysis in March (S&P -34%)—you've already decided what to d...
Sunk Cost Fallacy in Stock Ownership
**Intermediate** | Published: 2025-12-28 ## Why It Matters Sunk cost fallacy—the tendency to **continue holding an investment because of previou...
Mindfulness Techniques for Volatile Markets
**The practical point:** Mindfulness doesn't eliminate fear when your portfolio crashes -28%—it creates a 5-minute gap between feeling fear and sellin...
Habit Tracking for Financial Routines
**The practical point:** You don't need willpower to rebalance if you have a habit—"First Friday of quarter" removes the need to decide "Should I reba...
How Media Consumption Shapes Investor Behavior
**Difficulty:** Intermediate **Published:** 2025-12-28 ## Definition and Key Concepts Media consumption in investment contexts refers to exposure to...
Designing Automation to Remove Bias
**Difficulty:** Advanced **Published:** 2025-12-28 ## Definition and Key Concepts Automation in behavioral finance refers to predetermined rules exe...
Glossary: Behavioral Finance Terms
**Difficulty:** Beginner **Published:** 2025-12-28 ## Introduction This glossary defines 30 behavioral finance terms with one-sentence definitions f...
Loss Aversion and How to Counter It
**Intermediate** | Published: 2025-12-28 ## Why It Matters Loss aversion—the tendency to experience losses more intensely than equally sized gai...
Recency Bias During Sell-Offs
**Intermediate** | Published: 2025-12-28 ## Why It Matters Recency bias—the tendency to overweight recent events when forming expectations—shows...
Disposition Effect and Taxable Accounts
**Intermediate** | Published: 2025-12-28 ## Why It Matters Disposition effect—the tendency to **sell winning stocks too early** (to "lock in" ga...
Mental Accounting in Household Portfolios
**Intermediate** | Published: 2025-12-28 ## Why It Matters Mental accounting—the tendency to **categorize money into separate mental buckets** (...
Checklists to Improve Investment Decisions
Investment checklists reduce decision errors by 20-40% through systematic coverage of critical inputs. Aviation industry reduced fatal errors 60% with...
Fear vs. Greed Indicators Explained
Fear and greed indicators translate crowd sentiment into contrarian positioning signals. Institutional investors use quantified thresholds to identify...
Status Quo Bias and Portfolio Drift
Status quo bias describes the inertia coefficient—tendency to maintain current holdings despite changing fundamentals or valuations. Behavioral studie...
Building Rules-Based Rebalancing to Limit Emotion
Rules-based rebalancing removes emotional override by automating portfolio adjustments. Three primary approaches: threshold-based, calendar-based, and...
Core Asset Allocation Models for US Investors
Core Asset Allocation Models for US Investors Difficulty: Intermediate Publication Date: 2025-12-05 ## Definition and Key Concepts Core asset allocat...
Understanding Prospectuses and Offering Documents
**Investors must read prospectuses and offering documents to understand what they’re buying. These legal filings reveal a company’s financial health, ...
Primary vs. Secondary Market Workflows
Investors often conflate stock markets as a single entity, but they operate through two distinct workflows: primary and secondary markets. These syste...
Circuit Breakers and Trading Halts Explained
Markets are designed to absorb shocks, but extreme volatility can disrupt orderly trading. Circuit breakers and trading halts are safeguards that paus...
Dark Pools and Off-Exchange Trading Basics
**Opening** Dark pools and off-exchange trading are critical tools for institutional investors seeking to buy or sell large blocks of stock without r...
Role of FINRA and SEC in Market Oversight
Market oversight by FINRA and the SEC ensures fair trading, protects investors, and maintains market integrity. These organizations enforce rules that...
Glossary: Market Structure and Trading Terms
Market mechanics form the foundation of how investments are bought and sold. Whether you're placing your first trade or analyzing execution quality, k...
Understanding Margin Requirements Regulation T
Regulation T, enforced by the Federal Reserve's Board of Governors, sets the baseline rules for margin accounts in U.S. brokerage accounts. It require...
Clearing, Settlement, and the Role of DTCC
When you buy or sell a stock, the transaction isn’t complete the moment you click "submit." Behind the scenes, two critical processes—clearing and set...
Order Types Used by US Investors
When buying or selling stocks, bonds, or ETFs in U.S. markets, investors use specific order types to control how and when trades execute. These tools ...
Bid-Ask Spreads and Liquidity in US Equities
Every trade in US equities involves two prices: what buyers pay and sellers accept. The gap between these prices—the bid-ask spread—is a foundational ...
Short Selling Mechanics Under Reg SHO
Short selling allows investors to profit from declining stock prices but involves unique mechanics and risks regulated under Rule 10b-18 (Reg SHO). Un...
Options Assignment and Exercise Logistics
Options give investors flexibility, but the logistics of exercising or being assigned can create unexpected obligations. When an option holder decides...
Market Makers, Specialists, and Wholesalers
Market participants rely on invisible infrastructure to execute trades efficiently. Market makers, specialists, and wholesalers form this backbone, en...
After-Hours and Pre-Market Trading Considerations
Investors often assume stock markets operate only between 9:30 AM and 4:00 PM EST. However, extended trading hours allow participation before and afte...
Stock Lending and Borrow Programs
Stock lending and borrow programs are foundational to modern markets, enabling liquidity, short selling, and income generation for shareholders. These...
Technology Behind Modern Brokerage Platforms
Modern brokerage platforms rely on advanced technology to execute trades efficiently, but their inner workings remain opaque to many investors. These ...
How Corporate Actions Flow Through Brokerage Accounts
Corporate actions—events like dividends, stock splits, or mergers—directly impact brokerage accounts. Investors must grasp how these actions flow thro...
Payment for Order Flow and Regulatory Debates
Payment for order flow (PFOF) is a practice where broker-dealers receive compensation from market makers for directing customer trades to them instead...
How ETFs Are Created and Redeemed
Exchange-traded funds (ETFs) are among the most popular investment vehicles globally, but their unique structure requires a specialized mechanism to m...
How the NYSE and Nasdaq Differ
Investors need to understand how stock exchanges operate to make informed decisions. The New York Stock Exchange (NYSE) and Nasdaq represent two disti...