How the Stock Market Works

Begin the course by exploring the difference between beating the market and investing in it. One carries very high risk, while the other is a much safer strategy. Learn about the human propensity to look for patterns in everything - but are stock returns predictable? #Literature & Learning

The stock market may be high-tech and getting more sophisticated every year, but it is essentially like markets you already know, such as grocery stores and car dealerships. Armed with this insight, delve into the special features of stock markets and how they work.

Explore the relationship between the risk of investing in stocks and the return you can expect from owning them. Survey the average return on a broad portfolio of stocks held over many decades. Next, focus on the short-term volatility that makes many people understandably nervous.

Learn the most important formula in investing - the simple equation for compounding earnings. Then focus on the three variables that determine how much money you'll have at the end of an investment. Most people worry too much about the one variable that they can't reliably control.