A single stock, also called a share, is a piece of a company that you can purchase and own. When you invest, you buy a part of the company and give them money to build and grow. A stock is just one type of investment that can make up your portfolio. Other investments can include bonds, real estate, and mutual funds.
A stock is a little piece of a much bigger company. Imagine that a company is a castle made out of Legos. A stock is like one Lego piece in that castle: When you buy the stock, you own that piece of the company. When the company's value goes up, that makes your Lego piece worth more money too, and if it goes down…so does that Lego piece.
An investment is something you can buy and hold with the hope that it will make you money. Like a seed, it needs time to grow into a tall tree or produce delicious fruit. But like plants, it's no guarantee that things will go as planned. Through diversification, buying a bunch of different things increases your chances of some of those "seeds" doing well, even if others don't.
A bond is like an "I owe you" (IOU) from a company or government that can be traded on the market. When a company needs money, it can sell bonds to people like you and me. They "borrow" this money from you, hoping that your investment can help grow the company. You make money if they pay you back with interest over time. The interest rate on each bond is different. More risky bonds have a higher interest rate, since it is more likely that they won’t pay back on time and lenders need to charge a higher rate to make up for potential losses.
An ETF is a way to easily invest in multiple companies at once that usually focuses on a theme like “the car industry”. You pay a small fee to a company that monitors the performance of the ETF and researches the industry or region the ETF is focused on.
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SIGN UPThis information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals.