We all need to know the three “ing’s” of managing money – spending, saving and investing. The first two – spending and saving – are easy to track. Looking up your credit card statements from time to time will give an idea where most of your paycheck is going. And because what is not spent is saved, these statements will also tell you where some of your paycheck should not be going.

Investing, on the other hand, is a different ballgame. It is based on deep scientific theories and strategies (a few Nobel Prizes have been given out on them), but the kind of science that impacts our everyday life. Investing in practice is about growing our financial asset with time, so that we have enough funds available for later years when we can no longer work for a living. This is something all of us must face, whether a seasoned investor or average Joe (like me).

Unfortunately, no school curriculum yet offers a mandatory course on finance and investing. We are on our own when it comes to learning how to manage our money. In this learning process (as in any other), it helps to know the basic concepts. In a series of posts over the next few days, I am putting together some of the most frequently used terms and concepts in finance and investing. Much of the material here is taken from the excellent textbook “Investments” (5^th ed.) by Bodie, Kane and Marcus. The list will grow as more posts are added:

1. Why should we invest?
2. What is an “asset”?
3. Players in an investing environment.
4. Banks, Investment companies and Investment banks.
5. What is a “market”?
6. What is a “security”?
7. What is a “money market”?
8. What is a “bond”?
9. What is a “stock”?
10. “Real” and “nominal” interest rates.
11. What determines the “real” interest rate?
12. Efficient Market Theory vs. Fundamental Analysis – Part I.
13. Efficient Market Theory vs. Fundamental Analysis – Part II.
14. …

We begin with Why should we invest?

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