What is an ETF, and why does its price differ from its value?
An ETF is a pooled fund you buy and sell on a stock exchange like a share. Here is how its market price, its NAV and the costs of trading it fit together.
Read the noteThe notes, page 2
Notes No. 011–020, in reading order.
Why do bond prices fall when interest rates rise?
A bond's coupon is fixed, but market rates are not. When new bonds pay more, older bonds must get cheaper to compete. Here is the arithmetic, with the SEC's own example.
Read the noteWhat is asset allocation, and how do you think about your own mix?
Asset allocation is the split of your money between stocks, bonds and cash. It sets how much your portfolio can rise and fall more than any single pick does. Here is how the mix works.
Read the noteWhy is market timing so hard, even when a drop seems obvious?
Getting out before a fall is only half the job. You also have to get back in at the right time — and pay costs and taxes along the way. Here is the arithmetic.
Read the noteHow is inflation measured with the Consumer Price Index?
The CPI tracks about 80,000 prices a month, weights them by what households actually spend, and turns the result into one index number. Here is how that number is built and read.
Read the noteHow does a blockchain work, step by step?
A blockchain is a shared ledger kept by many computers, where each block is chained to the last by a digital fingerprint. Here is the mechanism, with hashes computed in code.
Read the noteRisk and return explained: why higher potential returns come with bigger risks
Investors who take more risk expect to be paid for it, but the payment is never promised. Here is how the trade-off works, with the arithmetic of losses and volatility.
Read the noteWhat is a stock market index, and how is one calculated?
"The market was up 1% today" usually means an index was up 1%. Here is what an index measures, how weighting changes the answer, and how investors use one.
Read the noteWhat is an index fund, and how does it track the market?
An index fund copies a market index rather than picking winners. Here is how the copying works, why it tends to cost less and where it can fall short.
Read the noteWhat is a bond's yield, and how is it different from the coupon?
The coupon is fixed when a bond is issued; the yield depends on what you pay for it. Here are the four yield numbers beginners meet, worked out in code.
Read the note