BASIC POINTS

1. You should always be comparing your percentage gains to the S&P500 - this is your baseline. The S&P500 is an index (a group of companies’ stocks viewed together) of the largest 500 companies in the US. 

2. There is a difference between investing and trading. Investors take a long-term approach and will likely hold stocks for years. Traders typically have a more short-term approach and are more likely to utilize fluctuations in prices and market volatility to strategize their earnings. 

3. Basis points - A financial unit of measurement, especially useful when discussing small changes. One basis point is equivalent to 0.01%. So if a bond yield decreases from 2.75% to 2.70%, its yield has decreased by 5 basis points.

4. You make money in two ways through the stock market. 

1. 1. Capital gains - the money you make when a stock goes up in value. You bought a stock for $500 a share a year ago and today it is trading at $600 a share (Congrats you’ve made money!). Thats 20% or 2000 basis points for anyone who was paying attention to point #2. 

   2. Dividends -  kickbacks from the company for your investments (given as a fixed amount per share).

5. Interest and interest rates explained 

• Interest  - This is the money the borrower pays to your lender 

• Interest rates - Usually the amount of money, paid or received on an investment or loan, or financial transaction etc. that is usually measured or expressed as a percentage of the amount of money lent, invested, borrowed, or whatever 

1. 1. 1. As a borrower, you want low interest rates. As an investor you want higher interest rates. 

      2. If I borrow $100 they charge me a 7% interest rate. I will have to pay $7 each year in interest in addition to paying back the $100 I borrowed (referred to as the principle). As an investor, if I invest $100 in a stock that pays a 5% dividend, then I will receive $5 each year in addition to the price of the stock when I sell it. 

6. The Fed (Federal Reserve) is everything and its chairman, Jerome Powell (Joe’s answer to the “If could have lunch with anyone in the world” question) is basically the finance god. They determine the Fed funds rate (interest rates) and interest rates are what make the business and finance world go round. 

1. 1. Right now Fed Funds rate are around 5.25%. This number is relatively high for the last 15 years and is a response to the growing inflation we’ve seen over the last 2 years. 

   2. The finance community does expect the Fed to cut interest rates this year (probably a series of cuts) but inflation doesn’t seem to be going down as much as they were hoping so that cut will likely not come until June at the earliest.