ASSET CLASSES

SINGLE COMPANY STOCKS

• You buy a share of a single company.
• You own a part of the company.
• If you're lucky, you get a periodic dividend, from the company earnings.
• High risk - Companies can go bankrupt or get regulated by government.
• Don’t put all your eggs in one basket.

GROWTH STOCKS

Companies that the market expects to grow revenue or earnings generally faster than 10% per year.

Typically

• Technology stocks, like Apple, Google, Microsoft, Tesla, Facebook, Amazon, Adobe, etc.
• Don't pay out dividends to shareholders, the money are invested in the company instead.

VALUE STOCKS

Companies with a long (30-60 years) record of attractive and consistent dividend yields to the shareholders.

Typically

• Less volatile.
• Often complements growth stocks.
• Steady passive income, via dividend yields, without having to sell the asset.

INDEX FUNDS

• You buy a basket of different percentages of shares from multiple companies.
• Can include different international and/or national company stocks.
• Can be active (higher cost) or passive (lower cost) and follows an index.
• Dividend policy can be accumulated or periodic dividend yield payout per stock.
• Can often be bought in local currency, saving the risk of currency fluctuations, when buying and selling.
• Passive funds have lower annual percentage costs, where active funds typically has higher costs.

Examples of notable indices:

• Dow Jones (top 30 business on the stock market).
• Nasdaq (tech stocks).
• S&P 500 (top 500 business i America).
• Russell 3000 (U.S stock market benchmark for the 3,000 largest publicly held companies in America).
• Russell 2000 (smallest 2,000 stocks in the Russell 3000 Index).
• VIX - Volatility Index (visualizes the stock market volatility).

ETF - Exchange Traded FunDS

• You buy a basket of different percentages of shares from multiple companies or indices.
• Based on a theme-, trend-, industry domain or otherwise specialized focus, like robotics, real estate, electric cars, indices, hotel chains, biggest dividend companies, etc.
• Risk of currency fluctuations, when buying and selling, if not in local currency.
• Dividend policy can be accumulated or periodic dividend yield payout per stock.
• ETF's often have lower annual percentage costs than index funds.

OPTIONS - CALL & PUT CONTRACTS

An option is a kind of insurance contract you purchase, to buy or sell a minimum of 100 shares of a specific stock, at an agreed strike price, before a specific expiration date.

Investor portfolios are usually constructed with several asset classes. These may be stocks, bonds, ETFs, and even mutual funds. Options are another asset class, and when used correctly, they offer many advantages that trading stocks and ETFs alone cannot.

• The farther away the expiration date is, the smaller the risk.

SELLING A PUT OPTION

You sell a put option, when you want to own a stock at a discount.

BUYING A PUT OPTION

You buy a put option, because you believe the stock price will decrease in the future and you want to be able to sell 100 shares of the stock, at a higher strike price, without owning any shares.

SELLING A CALL OPTION

You sell a call option, when you want to collect a premium, and hope the contract is not exercised (expire worthless), because the price is below the strike price, at the option expiration date.

You have to sell the stocks to the buyer, if the contract is exercised. But you will always keep the premium.

BUYING A CALL OPTION

You buy a call option, because you believe the stock price will increase in the future and want to buy it at a lower strike price.

FUTURES

Futures are, in principle, like options except that buyers of options has "the right" to exercise their buy, but are not obligated, like buyers of futures.

KEY TAKEAWAYS