Investment Basics
What is an investment?
Putting money into something with the hope it will grow in value over time.
What does it mean to buy a stock?
You’re buying a small piece of ownership in a company.
What is a portfolio?
A collection of all the investments you own, such as stocks, ETFs, or funds.
What does stock price measure?
The current dollar value of one share of a company, based on what buyers and sellers agree it's worth right now.
What’s the difference between saving and investing?
Saving keeps money safe with low risk; investing tries to grow money but can go up or down.
What is one reason an investor might choose an ETF instead of an individual stock?
ETFs spread risk across many companies, so one company’s bad day won’t tank your whole investment.
Why do investors hold more than one investment in a portfolio?
To spread out risk — if one investment does poorly, the others can help balance it out.
What is market cap?
A company’s total value in the stock market, calculated as stock price × number of shares outstanding.
What is risk tolerance?
How comfortable someone is with their investments rising and falling in value.
What does it mean when a company has a competitive advantage?
It has something that helps it outperform rivals — like strong brand recognition, better technology, or lower costs.
How can your time horizon affect how you build your portfolio?
If you have a long time before you need the money, you can take more risk; if you need the money soon, you choose safer investments.
What does a company’s P/E ratio help investors understand?
How much investors are willing to pay for each dollar of a company’s earnings — a quick way to see if a stock is cheap, expensive, or typical for its industry.
Why do investors care about return on investment (ROI)?
ROI shows how much money they earned compared to what they put in, helping them judge if an investment was worth it.
Give one example of a red flag that might make an investor pass on a company.
Examples include high debt, slowing sales, leadership scandals, constant losses, or unclear business direction
Explain asset allocation in one sentence.
Whatever Jacquis says it is...
Why do investors read a company’s earnings report?
To see how the company actually performed (profit, revenue, changes in business) and whether it's growing, shrinking, or facing challenges.
Why is it important to start investing early?
Because your money has more time to grow through compounding, even with small amounts.
Explain how risk vs. reward tradeoffs influence whether you buy or pass on an investment.
Higher potential reward usually comes with higher risk, so investors must decide if the possible gains are worth the chance of losing money.
What is the benefit of having both risky and safe investments in the same portfolio?
t balances potential growth with protection — the safer investments help steady the portfolio when the risky ones swing up and down.
What does a company’s revenue tell you about its performance?
Revenue shows how much money the company brings in from selling its products or services — it tells you whether the business is growing, shrinking, or staying steady.