investing basics

4 questions

What is a brokerage account?

A brokerage account is an investment account you open with a licensed firm that lets you buy and sell stocks, ETFs, mutual funds, and bonds. Unlike a 401k or IRA, there are no contribution limits and no restrictions on when you can withdraw your money.
What is compound interest?

Compound interest is earning interest on your interest — your returns generate their own returns, causing money to grow exponentially rather than in a straight line. Over decades, it's the single most powerful force in personal finance.
What is risk tolerance in investing?

Risk tolerance is your ability and willingness to endure investment losses in exchange for the chance of higher returns. It determines how much of your portfolio should be in stocks (higher risk, higher return potential) versus bonds (lower risk, lower return potential).
What is the difference between an ETF and a mutual fund?

ETFs trade on stock exchanges throughout the day like individual stocks, while mutual funds are priced once daily after market close. Both can hold the same underlying investments — for most investors, a low-cost index ETF and a low-cost index mutual fund are functionally identical.