Investing · Module 1 of 11
Why money cannot sit still
Why cash slowly loses value, what it means to put money to work, and which money shouldn’t be invested at all.
Key terms in Why money cannot sit still
- Inflation risk
Inflation risk is the chance that an investment fails to earn enough over time to keep up with rising prices. It applies even to conservative holdings that carry insurance or a guaranteed balance. The nominal amount can stay intact while the goods it can buy shrink, which is why regulators list it alongside market risk and business risk.
Source: FINRA, Risk
- Time horizon
A time horizon is the length of time an investor expects to hold an investment before needing the money. It is usually measured from the day funds are invested to the day they will be spent, such as a retirement date. Along with risk tolerance, it is one of the two main factors regulators say shape how a portfolio is divided among stocks, bonds, and cash.
- Compound interest
Compound interest is interest that is calculated on both the original amount deposited and the interest that has already been credited to it. Because each credited payment joins the balance that earns the next one, the balance grows faster than it would on the original amount alone. How often interest is credited, the rate, and any added deposits all change the result.
Source: Consumer Financial Protection Bureau, How does compound interest work?
Every term on Lever is in the money glossary.
About this module
Why money cannot sit still is part of Investing, one of 15 subjects in Lever. It’s a short run of 7 lessons, about 18 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
More in Investing
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2
What risk actually is
What risk really means, why higher returns come with bigger swings, and how much ups and downs you can live with.
9 lessons -
3
What you can actually own
Stocks, bonds, funds and index funds explained, plus the yearly fee that never sends you a bill.
10 lessons -
4
Actually starting
Open the account, start small, invest a set amount on a schedule, and keep an eye on fees.
7 lessons -
5
The days you cannot pick
Why staying invested usually beats trying to time the market, and why the latest news is a poor guide.
5 lessons -
6
The account with a tax break
Retirement accounts with tax breaks, free money from an employer match, and paying tax now or later.
5 lessons -
7
Limits, locks and deadlines
How much you can put into tax-advantaged accounts, the cost of taking money out early, and the deadlines to know.
6 lessons -
8
Moving it and naming it
What happens to your retirement account when you change jobs, and accounts meant for one specific purpose.
5 lessons -
9
Spending what you saved
How much you can take out each year in retirement without running out, and why the order of good and bad years matters.
5 lessons -
10
The mix that shifts
Choosing your mix of investments, rebalancing when it drifts, and all-in-one funds that do it for you.
7 lessons -
11
Choosing where it goes
Which account to fill first, which investments to keep where, and how to do it all if you work for yourself.
6 lessons
Try this module
It’s part of Investing. Lever will bring it to you when you’re ready, or you can go straight there.