18/05/2022
The main tools for investing
Bonds are papers that large companies or government agencies issue to borrow money against. Bonds have a fixed yield and term - that is, you know exactly when and how much you will get for them when you sell them. You also get regular interest payments - coupons. Yields are slightly higher than bank deposits, but they are stable and predictable.
Shares are papers that give you a certain stake in the company, equivalent to a portion of the assets and profits. If a company grows and shows positive financial results, the stock will also increase in value. Additionally, the company may pay dividends-a percentage of profits based on quarterly, yearly, or semiannual results. But if something goes wrong in the company, you also lose profits or even go into deficit. In the event of bankruptcy, holders of common stock generally get nothing. It's a riskier instrument than bonds, but it also offers higher returns.
Equity ETFs (Exchange-Traded Funds) are portfolios of securities that trade like regular stocks. These are complete sets of instruments that are often worth less than the individual stocks within them. ETF stocks have balanced risk: the high riskiness of some is offset by the stability of others.
