Questions

Every other section on this site is organised the way the subject is organised — by instrument, by mechanism, by document. This one is organised the way a question arrives: in the middle of the night, in plain words, usually after something has already happened. Each page answers one of them properly and then points at the pages that go deeper. All of it is information and education only — see the disclaimer.

The badges say how much a page assumes: Easy everyday words, nothing to look up · Medium one idea you may need to look up first · Hard written for people who work in the market.

What is it, actually

The words somebody types before they know any of the others. Each of these is written from a standing start and links onward rather than sending you to a glossary.

• What is a derivative?Easya contract whose value is read off something else. Four families, and the number in the headline is not the risk.
• What is a bond, in plain words?Easya loan cut into pieces you can sell, and that one fact produces everything else about bonds.
• How does the stock market actually work?Easytwo markets wearing one name, and in the larger one the company gets nothing.
• What is compound interest?Easyinterest earning interest: invisible for years, then most of the outcome. And it runs debt the same way.
• What is a dividend?Easycash out of the company and into your account, with the share price falling by about the same amount that morning.
• What is market capitalisation?Easyprice times shares. Not the value, not the cost of buying it, not money anybody put in.
• What does a P/E ratio tell me?Mediuma forecast in disguise, and four things that must match before two are comparable.
• What is short selling?Mediumselling something you borrowed. The loss has no ceiling and the position grows as it goes against you.
• What is a hedge fund?Mediuma fee structure and a set of permissions, not a strategy. A dozen unrelated strategies sit inside it.
• What is private equity?Mediumwhole companies bought with borrowed money, and no price on a screen for five years.

Starting from nothing

• What is a share, really?Easya vote, a claim on what is left over, and no promise of anything. Where the return comes from and why you are last in the queue.
• What is an option, in plain words?Easycalls, puts, the premium, and the three ordinary reasons an option loses money on a day the market went your way.
• What actually happens when I press buy?Easyrouting, matching, the spread you paid without being charged it, and why you own the share two days later.
• What do the fees actually cost me?Easyfive fees, not one, and what 1% a year removes from thirty years of compounding.
• What is an index, really?Mediuma rulebook with a number attached: what goes in, how much of each, and when it changes. The rules decide the return.
• Who is on the other side of my trade?Mediumusually somebody with no opinion at all, which is why "someone is selling" tells you much less than it sounds like.
• What does yield actually mean?Mediumfour different numbers travel under one word, and a quoted yield says almost nothing until you know which.

Things that went wrong

• What happens to my money if my broker goes bust?Easywhy the shares survive, why the cash is a different question, and which of your holdings are not assets at all.
• Why did my "capital protected" product lose money?Mediumfour ordinary reasons, all of them written into the document before you signed it.
• Can a fund stop me taking my money out?Mediumgates, suspensions and swing pricing: legal, disclosed, and triggered by exactly the conditions that make you want to leave.
• Why is my fund's return different from the index?Mediumusually the index version you were shown, not the fund doing anything wrong.
• Why did I not get the price I saw?Easythe screen showed one side of a two-sided market, for a size, at a moment that had already passed.
• What do I get if the company goes bust?Mediumthere is a queue, it was fixed the day you bought, and where you stand in it decides more than how bad the failure was.
• What is a margin call?Mediuma demand for collateral that arrives at the worst possible moment, by construction rather than by bad luck.

Things that are not what they sound like

• Why does a bond lose value when interest rates rise?Easythe coupon is fixed, so only the price can move. How far it moves has a name and a number.
• What does leverage mean, and why is it dangerous?Easyit multiplies the gain, the loss and the speed. The speed is what actually ruins people.
• What is the difference between an ETF and a fund?Easymostly how you buy it. Underneath, often the identical portfolio.
• What does a credit rating actually tell me?Mediumone opinion about one question, and three things it deliberately does not say.
• Is a stablecoin actually stable?Mediumstable as long as everyone believes it is redeemable. That belief has failed before, at speed.
• Is volatility the same as risk?Mediumno, and the gap is where several of the things that actually ruin positions live.
• Why does a leveraged ETF lose over time?Mediumtwice the daily move compounded is not twice the move over a year. The shortfall is arithmetic, not a fee.
• Why does a bond trade above 100?Mediumits coupon beats what is on offer today, and the premium is charged up front and given back by maturity.

Deciding what to do

• How much should I put in any one thing?Easythere is no correct number, but there is a correct question: what happens to the whole if this one goes to zero?
• Why is my money worth less even though it grew?Easynominal against real, why cash loses quietly, and which investments actually track prices rather than merely being said to.
• Can I lose more than I put in?Easywith some instruments yes, and the line runs between having bought something and having promised something.

The bank, the insurer and the plumbing

Every question above is about something somebody bought. These are about the institutions that were already there — the account, the mortgage, the policy, the pension, the payment that takes three days — and about who is actually holding what.

• What does a bank actually do with my money?Easyit lends it. Your balance is a loan to the bank, repayable on demand and lent out for years.
• Is my money safe in a bank?Easybelow a statutory limit yes, and the limit is per person per bank rather than per account.
• What happens when a bank fails?Mediuma written order in which people lose money, and the reason a weekend is enough time.
• Why did the bank refuse my loan?Easywhat a credit decision is actually testing, and why the answer is rarely about the applicant alone.
• What happens when my fixed rate ends?Easythe mechanics of the reset, and where the payment shock comes from.
• Why does a payment take days?Easymessaging is instant, settlement is not, and the gap is somebody carrying a risk.
• How does a pension actually work?Easytwo entirely different machines share one word, and almost every confusion starts there.
• What am I paying for in an insurance premium?Easyfour parts, and only one of them is your own expected loss.
• What does a central bank actually do?Mediumit sets one very short rate and lends against collateral; everything longer is a forecast of that rate.
• Who actually holds my shares?Mediumthe chain from your statement to the register, and what each link does to your rights.

Not here?

The glossary defines the words, the learning paths put the pages in an order, and the search box — the magnifying glass in the header, or Ctrl-K — now searches the text of every page on the site, not just the titles. If a question keeps coming up and there is no page for it, that is a gap worth filling.