Investing FAQ: Simple Answers for Everyday Investors
Whether you’re new to the game or tightening up your money moves after reading “Wall Street to Your Street,” this FAQ breaks down some of the most common investing questions — in plain language, with Urban Profit flavor.
What’s the difference between a dividend stock and a growth stock?
Dividend Stocks — the steady, grown folks
These companies are past their wild growth days. They’re stable, mature, and make enough profit to pay investors cash (dividends) on a regular basis.
Traits:
Pay cash to shareholders (usually quarterly)
Less volatile
Great for passive income
Examples: utilities, telecom, banks, SCHD, DGRO
Think of them as:
That reliable cousin who always brings a “quality contribution” to the cookout.
Growth Stocks — the ones grinding for the come-up
These companies reinvest almost everything back into expansion — so they rarely pay dividends. The tradeoff? Big long-term upside.
Traits:
High growth potential
More risk and more volatility
Think tech, AI, biotech
Examples: NVDA, Tesla, early-stage MSFT
Think of them as:
“Just wait ’til I blow up.”
What does “annualized rate” mean?
It’s simply the yearly equivalent of a shorter-term return.
If your money grew 2% in one month, you didn’t make 24% this year — but the annualized rate shows what that return would equal if the pace continued for 12 months.
Plain definition: Annualized rate = a short-term return converted into a “per year” number.
Why it matters: It lets you compare:
a 3-month ETF return
a 6-month bond return
a 1-year stock return
all on equal footing.
For example:
Somebody says they made $500 in a weekend.
You say:
“Cool… but what would that be per year if you kept working like that?”
That’s annualizing.
What’s risk tolerance? And what types are there?
Risk tolerance = how much market movement you can realistically handle — emotionally and financially.
Here are the seven common levels:
1. Conservative — “I don’t want drama.”: Safe assets. Peace of mind > growth.
2. Moderately Conservative — “I’ll take a lil’ risk.”: Mix of safe + some growth.
3. Moderate — “Balanced ride.”: Even split between stability and growth.
4. Moderately Aggressive — “The dips don’t scare me.”: Mostly growth with a cushion.
5. Aggressive — “Shoot for the moon.”: Heavy on high-growth sectors.
6. Ultra Aggressive — “High risk, high reward.”: Speculative plays, crypto, startups.
7. Goal-Based — “Different dollars, different jobs.”: Risk shifts based on what you’re investing for (house vs retirement).
What is market volatility?
Volatility is just how fast and how wildly prices move.
Low volatility: smooth ride
High volatility: “hold on and don’t spill your drink”
Why volatility happens:
economic news
interest rate changes
earnings
global events
elections
hype, fear, memes — all of it
More emotion = more volatility.
How volatility affects you
1. Bigger swings in your portfolio: Up 4% today, down 6% tomorrow.
2. Tests your risk tolerance: A lot of folks find out they’re “aggressive”… Until the market turns red.
3. Creates opportunities: Volatility can give:
discounts
overreactions
temporary dips
…but also traps, if you’re chasing noise.
Types of volatility
Short-Term Volatility: daily/weekly noise
Long-Term Volatility: real economic shifts
Implied Volatility: options market expectations
Urban Profit analogy: Volatility is like Detroit weather:
64° at breakfast
snowing at lunch
72° by dinner
If you stay calm and prepare for swings, you’re fine.
If you panic every time it changes… you’re gonna be miserable.
