Magazine article Ebony

Understanding Stocks, Bonds & Mutual Funds

Magazine article Ebony

Understanding Stocks, Bonds & Mutual Funds

Article excerpt

Instead of working for your money, why not let your money work for you? It's a simple concept, but a struggle for some who may consider the investment game a risky world of facts, figures and uncertain predictions. But getting past the misconceptions and the mysteries to the long-term benefits of investing may be the smartest move you'll ever make.

For starters, get familiar with the basic building blocks of investing--stocks, bonds and mutual funds, three of the most popular methods of investing, which are perfect for beginning investors. "The hardest step is usually the first step, but it gets easier once you learn how quickly and safely your money can grow," says Carlita Collins, Chicago-area CPA and finance executive. "I've been investing since my first job, and I can't imagine a better way to save for the future."

One of the most common ways to begin building your financial future is through stocks. "A stock is a piece of equity, or a piece of ownership in a corporation," says Glinda Bridgforth and Gall Perry-Mason, co-authors of Girl Make Your Money Grow! "Each unit of stock is called a share and each share is worth a certain amount of money, or the market value. The market value is determined by how attractive the stock is to the public--the general population and investment professionals--and how much they are willing to pay for it."

Unlike stocks, which represent actual equity in a corporation, a bond is a loan that you provide to a company for a specified period of time. When you buy a bond, the money you pay is your principal investment. The bond issuer then agrees to pay you interest on that principal. Then, on the maturity date of the bond, your principal is returned. The further out the maturity date, the higher the interest rate you will be paid during the term of the bond. …

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