Investing 101 !

## TL: DR

- The stock market is place where buyers and sellers of publicly traded company shares come to transact 
- For a practical example, NYSE and Nasdaq are two of the most famous stock exchanges

## What is the stock market?

The stock market is a marketplace to buy and sell shares of publicly traded companies. 

The stock market operates similarly to an auction market. 

Buyers list the highest price they are willing to pay per share (the bid) and sellers list the lowest price they are willing to accept and sell to (the ask). When a buyer accepts the price of a seller (or vice versa) then a transaction takes place.

When talking about “the stock market” investors more precisely refer to stock exchanges such as NYSE and Nasdaq in the US, or their counterparts in other countries. 

Example of a stock market transaction: _Pansy wants to sell 5 stocks of XYZ and RJ wants to buy 5 stocks of XYZ. Pansy looks at the list of sellers and sees that RJ is willing to buy stocks at $1.00 per share. If she accepts RJ’s price, then the exchange records a transaction at $1.00 per share and that is the last price of the stock. Or she can say “I am only willing to sell at $1.25” and put herself on the list of sellers waiting for someone to accept her price._

What is the stock market? 

Starting from the basics

## TL:DR

- A portfolio is the umbrella term used to describe a combination of investments and other assets
- The 4 steps to building a portfolio

## What is a portfolio?

Your portfolio holds all of your investments - whether you hold a diversified basket of etfs or just a handful of options on TSLA. 

## What does a portfolio look like?
Here’s a few examples of portfolios

- A risky investment portfolio: Ali owns a portfolio, of which 50% is invested in stocks, 20% in cryptocurrencies and 30% in real estate. . If you look at this portfolio, you will see there’s a lot of risky assets, barely balanced by some real estate. So this is a risky portfolio. This would be a good portfolio to hold for an investor who does not rely on their portfolio as income and is willing to take more risk, to achieve a higher return. 
- A risk averse portfolio: Gianluca owns a portfolio of which 50% is invested in government bonds, 30% in exchange traded funds (ETFs) and 20% in blue chip stocks like Amazon. Compared to Ali, Gianluca holds a much less riskier portfolio as his major exposure is in government bonds (an almost risk-free asset). The rest of his assets are much less volatile compared to Ali’s. This is a good portfolio to hold for someone who is investing over a long term and is using their portfolio as a place to store money in safe assets, maybe preparing for retirement. 
- A FAANG portfolio: Jenny invests in only FAANG assets (some of the largest securities on the equity market and hence the least volatile) like Facebook, Apple, Amazon, Netflix and Google. An investor may have preference for such a portfolio if the equities market is looking strong but they still want to protect themselves from volatility, so they invest in the biggest equities. However, by doing this, they are heavily exposed to the technology industry. 

## What are the key characteristics of a portfolio?

NAV: Net Asset Value = Total Value of Assets - Total Value of Liabilities

The per/share unit price of a portfolio at a specific time and date. This can be calculated at the end of each day using the market close price. 

Concentration: Percentage of exposure in a specific industry

An investor may choose to invest in a wide variety of industries to diversify their capital, or invest in a specific industry and be highly exposed to a single industry. 

Risk: Chance of losing some or all of your investment 

Leverage: Trading using borrowed funds with the hope of earning a higher return

## How do I construct a portfolio?

Constructing a portfolio is a fun exercise for an investor. It allows you to combine all your investing (and ethical) views into a single investing basket that will hopefully outperform the market

Read more about this in our “Construct a portfolio” article