Investing Basics

Investing requires saving money, investing it, and developing a diversified portfolio that is focused on the long term.

Frequently Asked Questions
  • What are the types of investments?

    Investments are products that are purchased with the expectation that they will produce income or profit, or both, and there are three types. Ownership investments, such as stocks or real estate, are the most volatile and profitable class. Cash equivalent investments can quickly be converted into cash. And lending investments are generally less risky.

  • What are the rules of investing?

    There are lots of rules, or strategies, for investing. A couple of commonly repeated rules include "never lose money" and "invest when there's blood in the streets." There's also the rule of 72, which is a formula used to estimate the number of years required to double the invested money at a given annual rate of return.

  • How can I start investing?

    Decide on the type of investor you want to be. When opening a brokerage account, a broker will ask you about your investment goals and what level of risk you’re willing to take. Some investors want to take an active hand in managing their money’s growth, while others prefer to “set it and forget it.”

  • What is the Buffett rule of investing?

    Warren Buffett famously once said, “The first rule of an investment is don’t lose [money]. And the second rule of an investment is don’t forget the first rule. And that’s all the rules there are.”

Key Terms

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