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Investment Products – Basics of Investing
There are many different investment products to choose from but four major investment products are “must knows” for anyone preparing to invest.
Stocks: Stock is a share in the ownership of a company. Holding a share in a company means you are a shareholder. The shareholder has a claim to a portion of the company’s earnings and any voting rights attached to the stock. Publicly traded companies issue shares of their stock to the general public.
Examples of publicly traded companies: Wal-Mart (Ticker: WMT) , Wells-Fargo (Ticker: WFC), Microsoft (Ticker: MSFT), Google (Ticker: GOOG)
Bonds: A bond is debt issued by a federal, state or local government agency or a private company. Basically, a bond investor (bond holder) lends money to the company or government. The company or government makes fixed interest payments to the bondholder. This fixed interest is paid over a set period of time. This period of time is called a term. When the term is finished. the bondholder is paid back their principal (original investment amount).
Examples of Bonds: Corporate Bonds, Municipal Bonds, Treasury Bonds, Treasury Zero Coupon (interest paid in lump sum)
Learn more about bond investing
3) Mutual Funds: A mutual fund is a form of investment that gathers money from several investors and invests that money in a specific group of investments like stocks or bonds. Mutual funds are usually offered through financial institutions and investment firms that hire professional fund managers to oversee the fund’s holdings.Mutual funds are sold in shares. Each share is a tiny fraction of the investments owned by the mutual fund.
Great resource for Mutual Fund Investing
Exchange Traded Funds (ETFs): An ETF is an investment product representing a basket of stocks, bonds, real estate, commodities…You name it and there is an ETF for it! ETFs trade like stocks. They can also be sold short.
Examples of ETFs: Standard & Poor’s 500 Index (Ticker: SPY), NASDAQ 100 (Ticker: QQQQ), DOW Diamonds (Ticker: DIA)
Here is a great resource for ETF Research
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