Investing 101

A Beginner's Guide to the Basic Concepts and Terminology of Investing

First Share’s slogan “from one comes many” is meant to convey the fact that, regardless of how much money one has to invest, anyone can turn their first share into a solid investment portfolio over time by following three simple rules:

1. Invest Consistently: Invest on a regular basis regardless of what the overall stock market is doing. This is referred to as Dollar Cost Averaging and results in the investor acquiring more shares of a stock when the price is depressed and fewer shares of a stock when the price is high.
2. Diversify: You’ve heard the saying, “don’t put all of your eggs in one basket.”  It also applies to investing.  It’s important that you own a basket of different stocks in different industries to limit the potential downside to your portfolio if one of those “eggs” should break.
3. Reduce Costs: This is why First Share was created, to help investors purchase stocks while avoiding excessive brokerage fees and commissions.  The average retail investor – that’s you – trades stock once a month.  If you assume that each trade costs $10 that’s $120 per year.  If you could avoid those fees and, instead, invest them, then in 10 years that $120 could be worth almost $260.  This can add up to a significant amount over time.

We’ve put together a list of basic concepts and terminology that we refer to as A Beginner’s Guide to the Basic Concepts and Terminology of Investing. While this guide itself won’t make you the next investing guru, it will help you to build a solid base for future learning and we’ll be here to help.

Just remember, the road to wealth starts with your First Share!

Basic Concepts of Investing with Stocks

Overview

• What is a Stock?
• How Stock Markets Work

Investment Strategies

• Dollar Cost Averaging
• Fundamental Stock Analysis
• Growth vs. Value Investing
• Technical Analysis
• Dogs of the Dow

Understanding Valuation Ratios

• Price/Earnings (P/E)
• Price Earnings/Growth (PEG)
• Price/Sales
• Price/Free Cash Flow
• Short Interest
• Beta
• Dividend Yield

Basic Concepts of Investing with Bonds

Overview

• What is a Bond?
• The Inverse Relationship Between Bond Prices and Interest Rates

Types of Bonds

• Coupon Bonds
• Zero-Coupon Bonds
• Treasury Securities
• Municipal Bonds
• Corporate Bonds
• Inflation-Indexed Bonds

Investing with DRIPs and DPPs

Overview

• What are DRIPs and DRPs?
• Buying Stocks without a Broker
• What are DPPs?
• Purchasing Your First Share
• Establishing a DRIP Account

Understanding the Economy and its Effect on the Stock Market

Overview

• What is GDP?
• What is Inflation?
• Unemployment
• What is the Federal Reserve?
• How the Federal Reserve Influences the Economy?
• Monetary Policy vs. Fiscal Policy

Investor Glossary:

• Terminology that any investor should know.