Here is a summary.
1. First you want to learn time value of money. (Basic arithmetic)
2. Using time value techniques you can learn how to value a plain US treasury bond that pays coupons. Say a ten year bond. At this point it is also good to understand why the US treasury is the benchmark rate used all over the world -- why the full faith and credit of US is called the risk free rate.
3. The big step: A stock, a piece of a business, can be valued just like a bond, with the key understanding that:
3a. Stock coupons (earnings) can wary and are not fixed as in a case of a US treasury bond -- they can go up or down.
3b. Stock coupons may not necessarily be given back to you in cash: 1) some of it can be given to you via dividend, 2) some of it can be given back to via stock buyback, 3) and some of it can be given back to you by a reinvestment in the same company or a purchase of some other company or business. The potency of the second method, and especially the third method of giving cash back to you are also uncertain: the money reinvested in the business can produce 2 dollars for every 1 invested, or it can produce 0 for every 1 invested.
Over time the market will value the company based on how well it performs 3a and 3b. Buy and hold will work really well for individual stocks if you can understand 3a and 3b of a particular company, if you then buy the stock at a price fair to current stock coupon levels and discount rates, and if the company does perform 3a and 3b well over the years that you hold it.
If you do this you are literally investing. You are buying a piece of business with the view that it will increase revenue and profits, and that management will return those profits back to you in one way or another and not squander them.
Now, on this site and others, (in this sub forum especially) you will hear a lot about index funds, and diversification, and stuff like: "You must have bonds, and you must have international exposure (why?), and its all about asset allocation (whatever does that mean), and its all about the dividend (as though buybacks and reinvestment are not performed with real money), go to Bogleheads, go to Vanguard, go read Bernstein, etc, etc."
What it all boils down to is "we don't want to do 3a and 3b so we will just buy everything..."
Buying everything is not a bad strategy, but you should understand the limitations.
Go to
http://www.google.com/finance?q=NYSE%3AKO&ei=oVPGUqCkKKXz0gHo1AEClick on Zoom: All
On the Compare: line click on the S&P 500 check button.
Take a look at the results.
Coca Cola has done really well in terms of 3a and 3b over the years. The indexes by definition are filled with some companies that have really crappy 3a and 3b, some companies with average 3a and 3b, and of course some companies really amazing 3a and 3b as well.
However, by the same definition the results will be average as well.