What’s the difference between stocks, bonds and mutual funds?
In: Economics
Stocks are publicly traded shares of a company that people can buy and sell as they please. Their price fluctuates depending on buying and selling pressure.
Bonds are a collection of financial assets sold by the government or banks to raise money with the promise that the buyer will receive X amount back in X amount of years. Say you buy $100,000 worth of bonds, with a return rate of 2%, that expires in 10 years. That means you’ll receive 2k annually from the bonds, until 10 years are up, in which you’ll receive $100,000 back, netting you 20k. (The math changes depending on the type of bond and how the buyer/seller wants it arranged.)
Mutual funds are just a shared pool of investors money usually managed by a bank that buys stocks and bonds with the pooled money. The goal here is to minimize risk to the individual investor.
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