What’s the difference between stocks, bonds and mutual funds?
In: Economics
Stock is a share of ownership in a private company. If it is a pubicly traded company you can buy and sell it as you want. The value goes up and/or down and/or up again throughout the day depending on a lot of factors. Some companies also pay dividends for owning stock, it is from money they earn that they share with the stockholders.
A bond is usually a government thing, sometimes issued by comoanies, usually for projects of various kinds. They usually have a set maturity date with a set amount of growth (i.e., you buy it for $1,000 and in 5 years the government will buy it back for $2,000). They *can* be traded but they aren’t going to vary in value as much as stocks. It’s generally more of a longterm commitment when you buy into it, sort of like you’re giving the government a loan to do something like build a new bridge and they’re going to pay you back with interest.
A mutual fund is a portfolio of investments (usually stocks or some other resources) that is managed by a broker. These grow or lose value with the companies they have invested in but since they are invested in multiple businesses the value may not grow as fast or as slow. You can get dividends from them too. There is usually a service fee with these that you may or may not see directly as they are managed by people.
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