How much do you know about investing? DO you know anything? Have you ever even heard the words stocks, bonds, and mutual funds? If not, that's okay. You can learn the basics very easily.
When you are investing in stock, your goal is to buy stock at one price and sell it at a higher price on a later date for profit. Shares of stock are issued by public companies on a stock exchange in order to raise money for their business. These prices fluctuate on a daily basis.
When you buy stock, you are buying part of the company. As a shareholder, you own part of the company. You are able to vote in the company, but usually just when voting for who will be on the board of director.
A stock is considered an equity security because you own part of the company. A bond is considered a debt security because you lend the company money, you don't own any of it. You can buy bonds from the government, state, bank, or a corporation. If you buy a bond for $1,000 that matures in 10 years with an effective interest rate of 5% paid annually, every year you will receive $50 until the 10 years are up at which time they will pay you back the $1,000.
You can hold bonds to maturity or you can buy and sell them. Bonds bought from the government usually have little to no risk. Corporate and municipal bonds have a rating that will tell you how risky they are.
For example, an AAA bond has very little risk, but will usually not give you a very high return. A bond that is rated at BB or lower is considered a junk bond because it has high risk but potential for a very high return.
Mutual funds are a mix of stocks and/or bonds. They work by pooling together a bunch of peoples money and a fund manager invests the money in several different investments for you.
No-load mutual funds are mutual funds that charge no fees. These types of funds, and any mutual funds for that matter, are a popular choice among investors because you don't have to do the investing yourself.
When you are investing in stock, your goal is to buy stock at one price and sell it at a higher price on a later date for profit. Shares of stock are issued by public companies on a stock exchange in order to raise money for their business. These prices fluctuate on a daily basis.
When you buy stock, you are buying part of the company. As a shareholder, you own part of the company. You are able to vote in the company, but usually just when voting for who will be on the board of director.
A stock is considered an equity security because you own part of the company. A bond is considered a debt security because you lend the company money, you don't own any of it. You can buy bonds from the government, state, bank, or a corporation. If you buy a bond for $1,000 that matures in 10 years with an effective interest rate of 5% paid annually, every year you will receive $50 until the 10 years are up at which time they will pay you back the $1,000.
You can hold bonds to maturity or you can buy and sell them. Bonds bought from the government usually have little to no risk. Corporate and municipal bonds have a rating that will tell you how risky they are.
For example, an AAA bond has very little risk, but will usually not give you a very high return. A bond that is rated at BB or lower is considered a junk bond because it has high risk but potential for a very high return.
Mutual funds are a mix of stocks and/or bonds. They work by pooling together a bunch of peoples money and a fund manager invests the money in several different investments for you.
No-load mutual funds are mutual funds that charge no fees. These types of funds, and any mutual funds for that matter, are a popular choice among investors because you don't have to do the investing yourself.
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Do you want to invest in commodities or financial derivatives? Learn about investing before you get started.
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