Stocks, Bonds, and Mutual Funds: The Investor’s Starter Kit
Starting your investment journey can seem daunting, but it boils down to three primary assets:
Stocks (Equities): When you buy a stock, you purchase a tiny piece of ownership in a company. Your return depends on the company’s performance—if the company does well, the stock price usually rises. They offer the highest potential returns but also carry the highest risk.
Bonds (Fixed Income): When you buy a bond, you are essentially lending money to a government or corporation. They promise to pay you back the principal amount plus periodic interest payments. Bonds are generally considered lower risk than stocks and provide a steady stream of income.
Mutual Funds: This is a pool of money collected from many investors to purchase a diversified portfolio of stocks, bonds, or other assets. They are managed by professional fund managers. Mutual funds are excellent for beginners because they provide instant diversification, spreading your risk across many investments.
Understanding these three tools is the foundation of building a robust and balanced investment portfolio.
