ok i'm reviewing my foundation in finance so im gonna just ramble and ramble. correct me if im wrong, good for you if you learn something.

Credit Default Swap?
Look at it as an insurance policy. It insures the buyer against a certain default, meaning bankruptcy, defaulting payment, downgrade of credit rating etc. Of course, the buyer pays a premium (usually 1/4ly)
Why is it even around?
Collateralized Debt Obligation. Wall st essentially bought tonnes of mortgages (loans for houses) and packed all of them into a huge folder and called it a CDO. Then CDO has different parts, the least risky part was rated AAA and slapped on with a CDS.

Stocks
You buy a piece of the company when you buy its stock. 2 main ways of earning money from stocks (assuming you dont short) are to receive dividends and the standard buy-low sell high policy. I'm a value investor so i usually dont recommend shorting. (I will discuss about it slightly later)
Lets discuss stocks with my portfolio now:
My portfolio is about 30% REIT (real estate investment trust/ stocks of land developers) REITs usually pay off good dividends and regardless of the current price of the stock, dividends are paid in cash. So look at it as pocket money from the company for rewarding you. Instead of reinvesting all profits (usually from rental), they pay you some in cash. For many value investors, this is pretty important.

I also happen to be holding on to DBS. For the sake of discussion, lets look at it as an ordinary stock and not a bank. If you had bought DBS when it is $13, and sold it now (1lot). Assuming the current price to be 14.52, you earn (14.52-13.00)x 1000 dollars. 1 lot = 1000 shares btw.

Ok so whats shorting. This is usually used by traders. You need a decent risk appetite for this so you DONT want to be overexposed in this area, could really burn your fingers. Instead of buying low and selling high. you sell high and buy low. Confused? This is how it works: Say I am selling you a shirt, i sell it to you for $120. however, i dont deliver the good just yet (cause i dont even own it). I go and buy the shirt for $100 AFTER you have bought it from me and deliver the goods to you. Thus earning 20bucks in the process. So shorting makes you money when the price is going down down down. Now think of this problem... think you got forever to deliver that shirt?

What is risk?
To simply matters, risk is when price changes are volatile. Meaning in a SHORT period of time, there can be huge changes in price. Big companies (blue chips) do not have much risk. The lowest risk products out there are usually government bonds and bills. They are guaranteed by the government so unless a military junta takes over your nation, you should be pretty safe.
High risk products are usually like forex (discussed later) and small companies-- they can enter both hypergrowth and bankruptcy court in the short term :)

Amplify risk?
Ever came across the term LEVERAGE? or has someone talked to you about gearing ratio and you think he is talking about his modified subaru?

Leverage is the magic that makes bankers multi-million/billionaires. BUT it also gave birth to rock bottom markets in 2008.
In layman terms, leverage is BORROWING to invest. so a man with $10 goes and borrows $1000 (ratio of debt to capital of 100). He invests $1000 and earns 1%, then returns the $1000. Check out the final return on capital. earn $10 with $10 investment... 100%. Now increase the earnings (cause 1% is really really low) to 5% and the leverage to $10,000 and you have him reaping a 5000% profit.
Problem? what is there are NEGATIVE earnings :(

If there isnt leverage, FOREX traders will be earning a few dollars a day. Sometimes, the opening and closing price of a forex coupon don't even differ by $0.01.... so spending a good $10,000 (on a $1 to $1 forex coupon) without leverage will earn our friend would have earned him a $100... Doesnt sound like a traders pay eh.

So to the chase, how do you earn money?
Be wise, always invest according to what type of risk you can afford. If you are a multimillionaire and want to take huge risks, go ahead, for the rest of us commoners, I say stick to low risk stocks and bonds. If you want, you can even hedge with gold or bills.

I dont wanna recommend anything to buy. I do recommend anyone who wants to buy to go and properlly do some research. Go read up, and learn the right philosophies. Think long term, do not be tempted by the good money of short term trading.

The best investment I have had so far?
Education. Never regretted a cent I spent. (Save for those damn uniball pens which spoil every time they drop)