Investing 101: How to Start Investing (2024)

Compounding Returns

When your investments start earning money, then that new, bigger amount earns even more money. Like magic, but real. The sooner you invest, the more time compounding has to make you rich.

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Bear Market

Opposite of a bull. The market’s going down, and investors are nervous. Fun memory trick: Bears attack their prey by swiping their claws down.

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Blue Chip

In poker, blue chips are worth the most. In investing, blue chips are stable companies (Coca-Cola, Disney) with a rep for making people money. Yes, please.

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Bonds

A loan investors give to a gov or company. In return, you get an IOU to get paid back the face value of that bond. Plus interest.

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Bull Market

The kind everyone likes. Bulls attack prey by thrusting their horns up...like prices in a bull market. No bullsh*t.

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Dow Jones

30 respected US stocks investors watch to gauge overall market performance. A group of Wall Street Journal editors decide which companies are in or out. If you hear ‘the market’s up,’ the Dow is probably having a nice day.

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Index

A group of investments used to ballpark how the broader market is doing. Basically, the yard sticks of the investing world. Names you should know: the Dow, S&P 500, and NASDAQ.

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Initial Public Offering (IPO)

A private company’s big debut on Wall Street. Once a private biz goes public, anyone can buy its stock.

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NASDAQ

The world’s largest totally digital stock exchange. Fancy. Also a nickname for the Nasdaq Composite —Mark Zuckerberg’s fav index (probably), which tracks over 3,000 (mostly) tech stocks.

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NYSE

Stock market HQ. The New York Stock Exchange is the biggest marketplace to buy and sell stocks and bonds. Trades go down electronically and via stockbrokers who work at 11 Wall St.

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Portfolio

All the investments you own (stocks, bonds, real estate, cash, etc.). Make yours like you would a donut: fat and well-rounded.

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S&P 500

Tracks the value of 500 big US company stocks. Like the Dow Jones index, it’s a good indicator of what kind of day your friends who work in finance had.

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Stocks

A tiny slice of ownership in a company. When the company is doing well, you get a piece of the pie. And vice versa.

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Volatility

The market has a hard time controlling its emotions. Volatility measures the frequency and severity of the market’s short-term mood (er, price) swings.

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Yield

Ugly word, beautiful meaning. It’s the money you earn from an investment over time, written with a % sign. Includes interest and dividends. Very rewarding.

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401(k)

A retirement account you get from work. You can invest money Uncle Sam hasn’t gotten a piece of yet and pay taxes on it later. Learn more from that new hire welcome packet you forgot to read.

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403(b)

Your version of a 401(k) if you work for a public school, charity, or nonprofit org. Invest for retirement now, and pay taxes later.

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Employer Match

Extra money from your employer you didn’t have to work for. Some companies will match a certain amount of your retirement contributions...just to be nice. And get a tax break.

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IRA

Stands for Individual Retirement Account, and just about anyone who earns money throughout the year can have one. For a traditional IRA, you invest already-taxed dollars, but might get a tax deduction come April depending on your income.

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SEP IRA

A retirement account just for small biz owners and people who make their own rules at work. Boss retirement moves.

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Social Security

Money the gov pays you just for being old. It’s a federal program that gives most retirees a steady check once they hit a certain age.

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Rollover

When you move investments from one retirement account to another. Like from a 401(k) to an IRA. Usually because you’ve changed jobs and want to remember where all your money lives.

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Roth IRA

Another type of IRA where you can invest post-tax dollars. This time, there’s income maximums. The more you make, the less you can contribute. The money you invest today grows and can be withdrawn in retirement totally tax-free.

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Vesting

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