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How the Stock Market Actually Works

Wall Street's geniuses, on average, lose to a fund that buys everything and sleeps.

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Stock Market A stock market is a collection of buyers and sellers trading shares, which represent fractional ownership claims on companies.
Hedge Funds How hedge funds use leverage, short selling, and complex trading to make money whether financial markets rise or fall.
Efficient Market Hypothesis The Efficient Market Hypothesis is an economic theory stating that asset prices always reflect all available information.
Expense ratio An expense ratio is the percentage of your total invested money taken out each year to cover running a fund.
Diversification (finance) Diversification spreads investments across different assets to reduce overall risk and volatility without hurting expected returns.
Volatility (finance) Volatility is a statistical measurement of how much an asset's price swings over time, calculated as the standard deviation of its returns.
Market timing Market timing is an investment strategy where you buy or sell assets by trying to predict future market price movements.
Index Fund An index fund mirrors a published market list instead of picking stocks, cutting fees and reliably outperforming most active managers over time.