Investing 101 - Portfolios, accounts, and assets

"Passive income" mostly comes from investments if you aren't doing things like collecting dividends from a famous media piece. These days, you can invest in a business through the stock market. The stock market (i.e., NASDAQ) is where businesses go to offer up portions of ownership of their business as "stocks". When you buy stock in a company, that company's financial performance can increase the value of existing stocks, but that value can also decrease if the company does poorly.

In order to start investing in companies and attempting to generate wealth, you'll need a brokerage account. In the US, most large banks like Chase, Wells Fargo, and Bank of America offer their customers the ability to open a brokerage account. Some financial institutions require very low or no initial deposits for brokerage accounts, but some large banks do. In my experience, Chase requires a $10,000 minimum deposit in order for a customer to open a brokerage account.

JPMC has two good introductory posts about portfolios and brokerage accounts. I copied some of the information from the post about portfolios.

Portfolio vs Brokerage Account

A portfolio is a collection of your stocks, bonds, cash, tangible physical assets, and so on: everything that makes up your net worth.

A brokerage account is a type of account financial institutions offer that provide mechanisms for buying, selling, and holding stocks, bonds, and shares of mutual funds.

A brokerage account is a type of portfolio in that it's a collection of the various securities - stocks, bonds, mutual funds, etc. - that make up the contents of your account.

Stock vs Share

Stocks are conceptual, shares are tangible. JPMC has another great article highlighting the differences. I copied the stock types from that post to put in this section, and I summarized the two main types of shares from this blog post as well.

Stocks are pieces of ownership of a given business. This ownership can be bought, sold, or traded, and doing so can potentially make money as the business records better and better profits.

Shares are how the pieces of ownership are numerically divided, valued, and represented as real entities.

Stock and share are used interchangeably in conversation since they technically mean the same thing, but you wouldn't say that you'd like to but 5 stocks of $MSFT, you'd say you'd want to buy 5 shares of $MSFT. You can, however, say that you'd like to buy stock in Microsoft as a general statement.

Stock types

Since stocks are conceptual, they're classified by performance of the company offering the portions of ownership.

Growth stocks: Stocks from companies expected to grow faster than most. These companies often reinvest profits instead of paying dividends.

Value stocks: Stocks from companies that may be underpriced compared to their actual worth, making them attractive to certain investors.

Blue chip stocks: Stocks from big, well-known companies with a proven track record of strong performance and stability may be classified this way.

Dividend stocks: Stocks from companies that regularly pay part of their profits to shareholders as cash or additional shares may be classified this way.

Penny stocks: Stocks from small companies that trade at very low prices, often under $5, and may be considered risky investments may be classified this way.

Share types

Since shares are tangible, they're classified by which way they skew: offering stability and return or offering power & say in the company.

Common shares allow holders to participate in key company decisions, like who gets elected to a company's board of directors. Common shares pay dividends to their owners, but this payout is based on the performance of the company. Owners of common shares are also last in line to receive assets if a company they invest in goes bankrupt.

Preferred shares provide holders steady income from ownership, as dividends from company performance are paid out at a steady cadence. Those with preferred shares are also first in line to receive assets as compensation if the company they've invested in goes bankrupt. However, preferred shares offer no voting rights and do not get to steer company decisions in any capacity with them.

Other investment assets and vehicles

If you don't feel comfortable investing in singular stocks, there are other investments you can put your money into.

Bonds are essentially loans that you give to a company or government entity. In exchange, the loanee will pay you interest at regular intervals and pay back the principal (loan amount) at the bond’s maturity date. Most bonds are long-term investments and are considered safer than stocks.

Instead of buying a single stock or bond, buying into a mutual fund allows you to invest in a pool of many. Mutual funds typically comprise multiple stocks, multiple bonds or both, and this diversification can help mitigate risk. Unlike stocks, mutual funds can only be traded at the end of a market day.

An exchange-traded fund (ETF) is a lot like a mutual fund in that it’s made up of multiple securities, like stocks and bonds. There are some differences in fund management and taxes, and ETFs can be traded at any time of day.

Retirement plans like 401(k)s or retirement accounts like a Roth IRA can expose you to a variety of investments, including stocks, bonds and/or mutual funds. These accounts are also tax-advantaged, meaning earnings, if any, are tax-deferred; you only pay taxes once you start withdrawing. White-collar workplaces tend to offer a 401(k) as a benefit, and they may have the additional benefit of employer contributions (i.e., matching your deposits until a certain threshold every year). However, there are yearly contribution limits, and your investment returns are generally not accessible (without additional income tax) until you turn the retirement age defined in your IRA or 401(k) plan.

Portfolio investment styles

Conservative: choosing to invest in low-risk assets like bonds and mutual funds to preserve your initial investment and reap a smaller but more consistent reward

Aggressive: choosing "hot" and popular assets to get the most bang for your buck on investment; higher risk but higher return

Speculative: "timing the market" - attempting to take advantage of the volatility of the markets to time buying assets at their lowest points and selling at their highest points

Hybrid: putting all of your eggs in different baskets, where you have a little of everything. You'll typically have all the usual suspects but in various states: bonds, aggressive and conservative stocks, foreign stock investments, physical items (i.e., gold) so that if any one of them goes south, the others still retain their value and any damage is mitigated.

What about just having a bunch of cash socked away in a high-yield savings account?

Cash is good for protecting yourself from market volatility. Cash is bad at retaining its value over time.

HYSAs don't have guaranteed rates and their expected yield can drop due to changes in the market, either sudden or gradual. In my experience, American Express offered HYSAs with 4% Annual Percentage Yield (APY) when I first opened my credit card with them in 2015, now they're down to 3.3% as of 2026.

Things like Certificates of Deposit help "transport" money to the future as the CoD accrues interest over fixed periods of time, but they don't directly grow the amount of money you have.

Stocks have astronomical returns versus just purely saving cash, which is why people bother investing money into stocks in the first place.