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Investing is putting money to work by buying something you expect to be worth more, or to pay you an income: a slice of a company (a share), a fund that holds many of them, a bond or a property. Long term means thinking in years, not weeks: five, ten, twenty.

Why so long? Because in the short run prices move on news, fear and euphoria; in the long run they tend to follow what really matters, which is how much money businesses make. A company that doubles its profits over ten years is unlikely to be worth the same as when it started.

Before investing, it pays to have the basics sorted: a cushion for the unexpected (several months of spending in something safe and easy to reach) and no expensive debt, like credit cards or consumer loans. Money you'll need soon has no business being in the stock market.

Compound interest is earning returns on your returns. In the first year you earn on what you put in; in the second, on what you put in plus what you earned; and so on. At first it looks like nothing is happening. Over the years, the snowball grows by itself.

What pushes the snowball most is time, more than the amount or fine-tuning the return. That's why starting early, even with a little, often counts for more than starting late with a lot. And it's why fees, which compound too (but against you), matter so much.

Volatility is how much the price moves: up and down, sometimes a lot. Real risk is losing money for good, or having to sell at the worst moment because you need the cash.

An example: the S&P 500 fell by more than 50% between late 2007 and early 2009, and in 2020 it lost a third in barely a month. Those who sold in fear turned a temporary fall into a real loss; those who could wait saw it recover over time. What separates one from the other isn't intelligence, it's having the cushion in place and a genuinely long horizon.

Risk also comes down when you spread it: many companies, several sectors and countries. And when you know what you own: investing in something you don't understand is the fastest way to sell it as soon as it drops.

There are two paths, and both are sensible:

• Indexing: buying a fund or an exchange-traded fund that tracks a whole index (for example the MSCI World, with around 1,500 companies from developed countries). You get the market's return minus a very low fee. It takes little time and a lot of patience, and it's hard to beat.
• Picking companies: studying businesses one by one, understanding how they make money, estimating what they're worth and paying a price that leaves room for error. It's more demanding: it takes time, a method and the stomach to trail the index for years at a stretch. In return, you can focus on the businesses you understand best.

They aren't mutually exclusive: plenty of people keep an indexed core and a slice in companies they follow closely. At Slow Compound Club we like analysing companies calmly and with numbers, and the tools on this site work for either path.

• Investing money you'll need. If you have a house deposit to pay in two years, that money isn't for the stock market.
• Chasing whatever has gone up the most. Last year's hot thing is usually expensive already.
• Selling in a panic. Falls are part of the journey; selling makes them permanent.
• Checking the price every day. The more you look, the more you'll want to fiddle.
• Ignoring fees. 1-2% a year sounds small, and over 30 years it can take a quarter of your money or more.
• Concentrating too much. One company, one sector or just your home country: if something goes wrong, it all goes wrong at once.
• Paying any price. An excellent company bought too expensively can be a poor investment for many years.
• Copying without understanding. If you don't know why you own something, you won't know what to do when it falls.

Play with the tools: everything is calculated in your browser, with example values you can change. If you come across a strange word, the glossary explains it with a worked example. And if you fancy some reading, the book list gathers the classics that have taught us the most.