So you want to learn how to invest? There are thousands of courses available, so we hope to save you some time by focussing on the courses which we think are most helpful for the average investor. By "average investor" we mean:
- You don't have a PhD in mathematics
- You don't have a huge amount of time or money to invest in getting up to speed
- You don't have a background in investment banking or fund management and you're not a "sophisticated" or professional investor
We've limited the courses to those relevant for long-term investing. That means that we have excluded any courses focussed on get-rich-quick day trading schemes. Trying to forecast any market short-term is gambling, not investment. We have not included any courses on "technical analysis" which we consider to be of no value.
If you're willing to learn in a fragmented way you can pick up bits and pieces of what you need to know from many excellent free resources. But the problem is you don't know what you need to know and the learning resources are of variable quality. We hope that this will save you some googling time.
Open Yale Econ 252: Financial Markets
If you only look at one free course (don't, use as many as you can!) this should be the one. Robert Shiller is a leviathan in finance but as you'll see he comes across as very humble. That's really refreshing if you're used to shouty men trying to sell you things. Some of the content here is a bit academic which is why we don't recommend the whole course for everyone. But you don't need any maths to understand most of what he says.
Behavioral Finance and the Role of Psychology Watch this video first because this is Shiller's specialist subject and nobody can explain it better. Shiller caused outrage in the early 1980s when he suggested that markets were not rational (or that they are not "efficient" in financial jargon). The fundamental reason for this irrationality is that markets depend on human behaviour and humans are not rational. These days behavioural finance is mainstream. If you want more depth on this topic take a look at Shiller's book "Irrational Exuberance".
Corporate Stocks Where he explains what a company is, the role of shareholders, the board of directors, and the Chief Operating Officer. He explains how from a company's perspective the reason why they issue shares is to raise equity financing, and he covers market capitalization, dividends, share repurchases, dilution, and the difference between common and preferred shares.
Monetary Policy A great introduction into central banks, their origins and history, the federal funds rate, targeted by the Federal Open Market Committee, and maintenance of reserve requirements and capital requirements which are used as tools to keep banks from going bankrupt. Shiller also talks about how regulatory approaches might prevent future banking crises.
Sal Khan's website isn't just for kids, it covers content that is up to degree level and beyond all explained using friendly narration alongside hand-drawn diagrams and calculations on an electronic blackboard. For the purpose of the long-term passive investor we think the following topics are particularly helpful:
Finance and Capital Markets
- Compound Interest: You need to understand compounding so the sections on "Compound interest basics" and "Interest basics" and "Present value" are very useful
- Inflation: Inflation is very important for long-term investors and also for understanding what central banks do. The whole topic is worth doing and includes Inflation basics, Inflation scenarios, Real and nominal return, Capacity utilization and inflation, Deflation
- Stocks and bonds: the introduction compares stocks and bonds, which is a good place to start but the really useful section is on stock valuation "Corporate metrics and valuation". It is well worth your time to hear the videos and do the exercises because it will show you how to work out whether stocks are cheap or expensive based on their reported income and balance sheet.
- Investment Vehicles, Insurance and Retirement: Useful if you want to understand funds and ETFs. Some is US-centric such as mutual funds and 401K which is a US pension account but the general idea of a fund is explained well.
- Money, Banking and Central Banks: Central banks can affect the price of assets, particularly bonds, so it pays to understand what it is they do and why they do it. There are many sections the most important are: "Treasuries (government debt)", which explains US government debt, "Multiplier effect and money supply", and "Fractional reserve banking" which may scare you.
- GDP: It's mentioned in the media all the time and if you invest over the long-term you have to understand what it means. The "Components of GDP" and "Real and Nominal GDP" sections are great and although they're based on the US economy our GDP accounting is similar.
- Inflation: Every section is worth looking at. "Measuring cost of living – inflation and the consumer price index", "Real and nominal return", "Deflation", "Inflationary and deflationary scenarios", "The Phillips curve: Inflation and unemployment"
- Foreign Exchange and Trade: These topics can lead to crises if a huge trade imbalance builds up, and so probably worth understanding but less important than GDP and inflation. The two sections are "Balance of payments- current account and capital account" and "Currency reserves".
"Basic Investing Concepts" by Institute for Financial Literacy, Peggy Chan
This is an introductory course on basic investing concepts. Learn about the following investing concepts:
- Investment objectives
- Risk-return trade-off
- Investment strategies
- What you need to know before investing
- Understanding your investment objectives
- Understanding your investment horizon
- Life Stages of an individual
- Market risk vs specific risk
- Return on investment
- Portfolio Diversification
- Asset Allocation
- Market Timing
- Constraints on Investment
Target Audience: Working Adults
Morningstar Learning Centre
If you invest in funds Morningstar is a great resource, its teams of analysts spend their time researching investment funds in detail and giving them ratings. Plus it provides news and it has a great Learning Centre. The Learning Centre has a huge library of articles and, more recently, videos which explain what stocks, bonds and funds are and how to use them to build a portfolio. The older material is largely in the form of text articles, and is therefore a little bit dry, but of a very high standard and is very comprehensive.
The structure of the Learning Centre is rather lacking. In fact we had to repeatedly go to Google and search for "Morningstar Learning Centre" to get the articles to re-appear. By searching you can find articles by title, and we would highlight the following as being particularly useful:
- Investing Classroom: Exchange-traded funds explains what ETFs are and their pros and cons
- Investing Classroom: What is a fund? Who better than Morningstar to answer this question? Explains the mechanics and the benefits of investing in funds, also a handy explanation of Net Asset Value.
- Investing Classroom: Bond Duration Very important if you invest in bonds is the concept of duration which is explained simply.
- What To Look for in a Fund explains Index funds, Funds of Funds and Lifecycle Funds.
- Investing Classroom: Constructing a portfolio How to select assets to build your portfolio. Talks about something called a "fat pitch" which is something to do with baseball, apparently, but the idea is that you wait to buy the best companies at a reasonable price. But also has an explanation of systematic and unsystematic risk, minimizing portfolio turnover, the use of funds in a portfolio and avoiding sector concentration.
- What is Alpha? And Why Should You Care? They have more recent "ask the expert" videos, where Emma Wall the senior editor at Morningstar asks experts a specific question. Here she interviews an Asset Allocation strategist and asks what alpha means and why it matters and draws out some interesting views.
- 5 Lessons for New Investors Links to five videos which explain "Why you can't afford not to invest", "How to start investing for the first time", "How to build an investment portfolio", "How to save for retirement" and "How to Invest Post Retirement".
Vanguard Investor Education
Vanguard is the hugely successful US low-cost passive fund provider. It also has some great educational resources geared toward its own investment philosophy, which is also in line with our investment philosophy (invest for the long-term, keep fees low through cheap passive funds and diversify across asset types to reduce risk).
What's great about Vanguard's Investor Education pages is that they are very clearly structured, but only on the US site. Note how they provide introductory research then if you want to go a bit deeper they link to Vanguard research. The five sections are:
Getting started investing
Investment plans & risk The first step is figuring out what you're trying to accomplish
- Turn your goal into an investment plan
- Find out how risk, reward & time are related
- See the research: Creating clear, appropriate investment goals
Asset allocation & diversification Make sure you understand these critical concepts.
- Protect yourself through diversification
- Start with your asset allocation
- See the research: Developing a suitable asset allocation using broadly diversified funds
The importance of costs You can control how much you pay for your investments.
- Don't let high costs eat away your returns
- See the research: Minimizing costs
Asset classes First, decide what to invest in: stocks, bonds, cash, or other types of investments.
- Use stocks to add the opportunity for growth
- Use bonds for income & stability
- Find out more about all your investment options
Mutual funds, ETFs & individual securities Then decide how to invest. Start with mutual funds and ETFs (exchange-traded funds). If you want, add individual stocks and bonds.
- Choose between funds and individual securities
- See how to decide on the mutual funds or ETFs you want
- See how to find individual stocks or bonds
Investment costs Find out what costs you'll face for the types of investments you choose.
- See the costs for different types of investments
This section talks about the Vanguard brokerage account, not relevant if you're after education
US-specific, so not interesting if you're a Brit
Managing your portfolio
Investment success might be closer than you think.
Performance & rebalancing Successfully managing your investments means doing a few key things.
- Follow these smart investment strategies
- See the research: Maintaining perspective and long-term discipline
Stock & bond markets Having basic knowledge about the financial markets may help you keep volatility in perspective.
- Learn more about the financial markets
- For advanced investors: Examining global economic trends
Estate planning Make sure your heirs benefit from your investment success in the way you want.
- Protect your assets for the future
- Use our guide for choosing beneficiaries
Our courses aren't free!
We believe anyone should be able to learn how to invest. That's why we offer lots of reasonably priced introductory courses for investment. That's also why our most expensive course, an introduction to Asset Allocation, is one tenth the price of comparable courses offered by some financial training companies. If you want to see what we offer just click on the button.