# Learn investing: plain-English guides

> Plain-English guides to investing and trading: S&P 500 funds, ETFs, IRAs and 401(k)s, momentum, options basics and more, with examples and sources.

Plain-English guides to the ideas behind investing and trading. Each one answers the question first, uses a worked example, and cites the regulators, exchanges and fund companies it relies on.

Tactfolio itself builds and tests long-only strategies on US stocks and funds. It does not trade options, CFDs or forex. Those guides are here to explain the terms, not to suggest trades.

## Investing basics

- [What is the S&P 500 index? How it works and what's in it](https://tactfolio.com/learn/sp500-index.md): The S&P 500 tracks about 500 large US companies. Learn how stocks get in, how the index is weighted, how to invest in it, and how far it has fallen before.
- [S&P 500 index funds: how to pick one and what they cost](https://tactfolio.com/learn/sp500-index-funds.md): Compare the biggest S&P 500 index funds, ETFs and mutual funds, by yearly fee, see how much fees cost over 30 years, and learn how to buy one.
- [ETF vs mutual fund: what is the difference?](https://tactfolio.com/learn/etf-vs-mutual-fund.md): ETFs trade all day on an exchange. Mutual funds trade once a day at their NAV. Compare pricing, costs and taxes, and see when each one makes more sense.
- [IRA vs 401(k): differences, 2026 limits and which to use](https://tactfolio.com/learn/ira-vs-401k.md): Compare a 401(k) and an IRA: 2026 contribution limits, Roth vs traditional taxes, income limits, withdrawal rules, and which one to fund first.
- [Commodities explained: what they are and how to invest](https://tactfolio.com/learn/commodities-explained.md): Commodities are raw goods like oil, gold and wheat. Learn the four main groups, how futures work, how commodity funds invest, and the risks to know.
- [What is an ETF: how exchange-traded funds work](https://tactfolio.com/learn/what-is-an-etf.md): An ETF is a fund that trades like a stock. Learn how ETFs work, what they cost, the main types, and the risks, with SEC sources.
- [ETF vs index fund: what actually differs](https://tactfolio.com/learn/etf-vs-index-fund.md): Many index funds are ETFs. Compare index ETFs and index mutual funds on trading, pricing, minimums, taxes and costs, with SEC sources.
- [ETF vs stock: risk, cost and control compared](https://tactfolio.com/learn/etf-vs-stocks.md): Compare ETFs and single stocks on diversification, single-company risk, costs and control, with a round-number example and SEC sources.
- [ETF expense ratio: what it is and what it costs you](https://tactfolio.com/learn/etf-expense-ratio.md): What an ETF expense ratio is, how the fund charges it, and how 0.03% vs 1% adds up over 10 and 30 years, with real fund examples.
- [Dollar cost averaging: how it works and when it helps](https://tactfolio.com/learn/dollar-cost-averaging.md): Dollar-cost averaging means investing a fixed amount on a schedule. See how it works with round numbers and what research says about lump sums.
- [Portfolio rebalancing: calendar vs threshold methods](https://tactfolio.com/learn/portfolio-rebalancing.md): What portfolio rebalancing is, why a 60/40 mix drifts, calendar vs threshold methods, and how taxes and costs fit in.

## Stocks and market moves

- [Momentum stocks: what they are and how to trade them](https://tactfolio.com/learn/momentum-stocks.md): Momentum stocks are recent winners that tend to keep winning for a while. See what the research says, how momentum crashes, and how to trade it with rules.
- [Momentum strategy: types, rules and an example](https://tactfolio.com/learn/momentum-strategy.md): A momentum strategy buys recent winners by a written rule. Learn the main types, the five choices every rule makes, a worked example, and the risks.
- [Stock gaps: what gap up and gap down mean](https://tactfolio.com/learn/stock-gap.md): A stock gap is a price jump between one trading day and the next. Learn what causes gaps, the four types, what a gap fill is, and why stop orders can miss.

## Options basics

- [Put vs call options: the difference, with examples](https://tactfolio.com/learn/put-vs-call.md): A call gains when a stock rises and a put gains when it falls. See worked examples with break-even prices, and how buying and selling options differ.
- [What is a covered call? How it works, with an example](https://tactfolio.com/learn/covered-call.md): A covered call means owning 100 shares and selling a call option on them for income. See a worked example, the risks, and how covered call ETFs work.
- [Theta meaning: how time decay works in options](https://tactfolio.com/learn/theta-meaning.md): Theta measures how much an option loses in value each day as it nears expiration. Learn how time decay works, with an example and the other Greeks.
- [Options Greeks: delta, gamma, theta, vega and rho](https://tactfolio.com/learn/options-greeks.md): What the options Greeks measure, with a table and one round-number example each for delta, gamma, theta, vega and rho. Education only, with the risks.
- [Implied volatility: what it is and how it prices options](https://tactfolio.com/learn/implied-volatility.md): Implied volatility in plain words: how it differs from historical volatility, what the VIX shows, and how IV crush hits option buyers. Education only.

## Leverage and derivatives

- [CFD trading: what it is, how it works and the risks](https://tactfolio.com/learn/cfd-trading.md): A CFD is a leveraged bet on a price change without owning the asset. Learn how CFDs work, why most retail accounts lose, and why the US bars them.
- [Margin trading: how buying on margin works](https://tactfolio.com/learn/margin-trading.md): How buying on margin works, the 50% and 25% rules, and a worked margin call example with round numbers. Learn the risks before you borrow.
- [Leverage in trading: what it is and how losses grow](https://tactfolio.com/learn/leverage-explained.md): What leverage is, how to work out a leverage ratio, and how 2:1 and 10:1 change gains and losses. Covers margin, CFDs, futures and leveraged ETFs.
- [Leveraged ETFs: how daily reset and decay work](https://tactfolio.com/learn/leveraged-etfs.md): How a leveraged ETF works, why the daily reset makes long-term returns drift, a two-day 2x and 3x example, and what regulators warn.

## Indicators and signals

- [Best indicators for trading: what each one measures](https://tactfolio.com/learn/best-indicators-for-trading.md): Moving averages, RSI, MACD, Bollinger Bands, volume and momentum explained in plain words, with what the research says and classic rules that use them.
- [Moving average: SMA, EMA and the 200-day rule](https://tactfolio.com/learn/moving-average.md): What a moving average is, SMA vs EMA with a 5-day example, the 200-day average, golden and death crosses, and dated backtests of classic rules.
- [RSI indicator: formula, how to read it, and limits](https://tactfolio.com/learn/rsi-indicator.md): What the RSI indicator measures, Wilder's 14-day formula with a worked example, what overbought and oversold mean, divergence, and what the evidence says.
- [Stochastic oscillator: formula, 80 and 20 levels, and SMI](https://tactfolio.com/learn/stochastic-oscillator.md): How the stochastic oscillator works, with Lane's %K and %D formula, a worked 14-day example, fast vs slow, and Blau's stochastic momentum index.
- [Stop loss: what it is and how stop orders work](https://tactfolio.com/learn/stop-loss.md): What a stop-loss order is, how it differs from stop-limit and trailing stop orders, and why a price gap can sell you far below your stop.
- [Sector rotation: how it works and what the evidence says](https://tactfolio.com/learn/sector-rotation.md): Sector rotation explained: the 11 GICS sectors and their ETFs, business-cycle vs momentum rotation, and a classic rule with dated backtest figures.
- [Trading signals: what they are and how to check them](https://tactfolio.com/learn/trading-signals.md): What a trading signal is, how rule-based signals differ from paid tip services, and what the CFTC and SEC warn about signal sellers and pump and dumps.

## Quant and automated investing

- [Algorithmic trading: what it is and how it works](https://tactfolio.com/learn/algorithmic-trading.md): What algorithmic trading is, the main types of trading algorithms, who uses them, the 2010 flash crash, and how US regulators oversee algo trading.
- [Quantitative trader: what quants do and how to become one](https://tactfolio.com/learn/quantitative-trading.md): What a quantitative trader does, the skills and pay, how quant trading strategies work, and how regular investors can use rules-based investing.
- [How to automate an ETF rotation strategy: 7 steps](https://tactfolio.com/learn/automate-etf-rotation-strategy.md): How to automate an ETF rotation strategy: pick a classic rotation, read its rules and backtest, paper trade it, then run it in your own Alpaca account.
- [Backtesting: what it is and how to backtest a strategy](https://tactfolio.com/learn/backtesting-explained.md): What backtesting is, how to backtest a trading strategy step by step, the biases that fool people, and why out-of-sample testing matters.
- [Tactical asset allocation: how rules shift your mix](https://tactfolio.com/learn/tactical-asset-allocation.md): What tactical asset allocation is, how it differs from strategic allocation, and what Faber's model did in 2008 and after, with dated backtest figures.
- [Trend following: how it works and what it costs](https://tactfolio.com/learn/trend-following.md): What trend following is, the research back to 1880, five classic ETF trend rules with dated backtests, and the whipsaws and flat years that come with it.
- [Mean reversion: what it is and how traders use it](https://tactfolio.com/learn/mean-reversion.md): Mean reversion is the idea that stretched prices drift back to their average. See the research, how RSI and Bollinger Bands measure it, and when it fails.
- [Risk parity portfolio: what it is and how it works](https://tactfolio.com/learn/risk-parity.md): Risk parity balances risk instead of dollars. See a simple stock and bond example, why funds use leverage, and what went wrong in 2022.
- [Markov regime model: how regime switching works in markets](https://tactfolio.com/learn/markov-regime-model.md): How Markov chains and hidden Markov models describe calm and stormy market regimes, what Hamilton's model showed, and simpler rules you can test.
- [Sharpe ratio: formula, examples and what is a good one](https://tactfolio.com/learn/sharpe-ratio.md): The Sharpe ratio measures return per unit of risk. Learn the formula, work through an example, see what counts as good, and know its limits.
- [Max drawdown: what it is and how to calculate it](https://tactfolio.com/learn/max-drawdown.md): Max drawdown is the biggest fall from a peak to a low. Learn the formula, the recovery math, and the S&P 500's worst drops in 2008 and 2020.
- [Calmar ratio: what it is and how to calculate it](https://tactfolio.com/learn/calmar-ratio.md): The Calmar ratio divides yearly growth by the worst drop. Formula, a worked example, its 1991 origin, and how it compares with Sharpe and Sortino.
- [Can ChatGPT or Claude backtest a trading strategy?](https://tactfolio.com/learn/backtest-with-chatgpt.md): Yes, with one catch. How to use ChatGPT, Claude or another AI assistant to build and backtest a strategy on real prices, and which results to trust.