Stocks & Index Funds
What exactly is a stock and how does it work? In simple terms, a stock is a fixed share in an ownership of a company, You can think of Stocks as a cake, where the entire cake represents the company, You can buy a slice of the cake and own that percentage of the company, So for example if I buy 2/3rds of the cake I own 2/3rds of entire Company, or for this example 2/3rds of the entire cake, The price of the Stock is also linear to how the Company is doing, Let's say you buy one Stock from Company A for 150$, and the Company performs well and is succeeding, it is very likely if not guaranteed for the price of the Stock to increase from 150$, However if you buy one stock worth 150$ from Company B, and Company B is declining, it is very likely and again almost guaranteed for the price to decrease from 150$.
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There is another as well, Called Index Funds, now imagine there are three cakes, and each cake represents a different company, Instead of buying 2/3rds of one cake, when you buy Index Stocks, you are buying 1/4th of each cake, Some people prefer Index Funds because they are generally lower risk and you do not need to worry if an Individual Stock plummets.
ETF's
ETF's stands for Exchange Traded Fund's, ETF's are like a diversified basket of investments that you can buy and sell on the stock market, similar to purchasing a variety pack of snacks from a vending machine. Just as the snack pack contains different snacks like chips, cookies, and candies, an ETF holds a mix of assets such as stocks, bonds, and commodities. Buying an ETF share is like getting a portion of each snack in the pack, providing you with instant diversification across multiple investments. The ETF's price fluctuates throughout the trading day based on market demand, offering liquidity and flexibility similar to selecting your preferred snack from the vending machine whenever you want.
Bonds
Bonds are like promissory notes* issued by governments or companies when they need to borrow money. When you buy a bond, you're essentially providing a loan to the issuer for a specified period, and they commit to paying you back the principal amount (known as the face value) when the bond matures. In return for lending your money, the issuer makes regular interest payments to you, similar to paying rent for using your funds. Bonds can originate from various entities such as governments, corporations, or municipalities, and their riskiness varies, with some being safer but offering lower returns, while others offer higher returns with increased risk.