Module 1 of 5 in Investing and portfolio management
Goals, time horizons and speculation
What separates investing from speculation, how to set goals with time horizons, and why risk tolerance and risk capacity are different things.
3 lessons in this module. Progress is saved in your browser as you go.
A portfolio is a plan for reaching goals, so it starts with the goals. This module separates investing from speculation, shows how to turn a vague wish into a goal with an amount and a date, and explains why how much risk you can afford matters more than how much risk you feel comfortable with.
By the end of this module you should be able to
- Distinguish investing from speculation by the source of expected return and the time horizon.
- Turn financial goals into amounts, dates and suitable investment types.
- Distinguish risk tolerance from risk capacity and explain how each affects a portfolio.
Lessons in order
Module test
10 questions, chosen at random from a bank of 30 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.
This module builds on
- Investing compared with trading: That lesson compares holding businesses with trading prices, which this lesson builds on.
- Probability and expected value: Expected value explains why speculative bets are hard to win on average.
- Nominal and real returns: Goal amounts must allow for inflation, explained there.
- Risk, return, liquidity and time horizon: That lesson explains the trade-off between risk and expected return.