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Stocks and Bonds

The document discusses stocks, bonds, and mutual funds. Stocks represent partial ownership in a company and allow voting and dividend rights. Bonds are loans issued by companies that pay regular interest to investors. Mutual funds pool money from investors to purchase a variety of stocks and bonds, providing diversification. The author plans to diversify their portfolio by investing in stocks, which balances risk through holding various investments.

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Hannah Jane Toribio
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60 views1 page

Stocks and Bonds

The document discusses stocks, bonds, and mutual funds. Stocks represent partial ownership in a company and allow voting and dividend rights. Bonds are loans issued by companies that pay regular interest to investors. Mutual funds pool money from investors to purchase a variety of stocks and bonds, providing diversification. The author plans to diversify their portfolio by investing in stocks, which balances risk through holding various investments.

Uploaded by

Hannah Jane Toribio
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Toribio, Hannah Jane

C31

What are stocks? What are bonds?


- Stocks are the partial ownership of the company. Investors would have a small fraction
of the company’s assets and its future earnings. However, stockholders do not own the
company’s assets. They have the right to vote in shareholder meetings. They will be
able to receive dividends which are share of profits. Bonds are loans given to a
company by an investor. In issuing a bond, the company borrows money to investors
and in return, they’ll pay interest on the money borrowed.

Differentiate stocks and bonds.


- Bonds are known to be less risky than stocks. Compared to stocks, bonds make
regularly scheduled payments and have a return of invested principal. Bonds make the
investors creditors, while stocks make them part-owners. Stocks are an equity of the
company. In stocks, in order to make money, investors will undergo stock appreciation
where if the stocks they own go up in value, they can sell their stocks to a higher price.
Another way is through dividends which are periodic payments issued by some stocks.
Stocks are known to have greater returns than bonds.

What are mutual funds? How is it different from stocks? How is it different from bonds?
- Mutual funds are collective investments that pull together the money of large investors to
purchase a variety of securities like stocks/bonds. Stocks and bonds are a part of the
mutual fund. Compared to stocks and bonds, it is a diversified investment that allows
investors to participate in a wide variety of investment types. If you’ll be able to purchase
a share in a mutual fund, the stakes will be one small fraction of all investments in that
fund. Stocks are investment in a single company wherein mutual funds hold many
investments meaning it can be hundreds of stocks in a fund. Bonds cannot be traded in
an open market compared to mutual funds.

How do you perceive yourself as an adult who plans for his/her investment ventures? What do
you think is the type of investment that works for you?
- As an adult who plans for her investment ventures, I will diversify my portfolio by
investing in stocks. Diversification is a strategy that unifies various investments in a
single portfolio. The variety of investments results in higher returns. In this way, I won’t
put all my money into one kind of investment. It lowers overall risks since it is rare that
one financial event can cause the portfolio to be wiped out. I am a type of person who
likes low risk investments.

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