Stocks, bonds, and funds: the basics
The three building blocks of almost every portfolio. What each one is, what it does, and how they fit together.
You could read a thousand investing books without ever needing anything past three concepts: stocks, bonds, and the wrappers called funds. Almost every portfolio on earth is made of these.
Stocks
A stock (or share) is a tiny piece of ownership in a company. You own a sliver of the company's assets, earnings, and future. Historically, the broad US stock market has returned about 10% per year on average (7% after inflation). Individual stocks can zero out; the market as a whole rarely loses money over any 20-year period.
Bonds
A bond is a loan you make to a government or company. You hand over money, they pay you interest for a fixed number of years, and return your principal at the end. Bonds are generally less volatile than stocks and return less over the long term (3–5% historically). They're the ballast in a portfolio — there to blunt stock drawdowns.
Funds (the wrapper)
A fund is a basket. Instead of buying one stock or one bond, you buy a single fund that owns hundreds or thousands of them. Index funds and ETFs are the cheapest, most common type — they simply track a market index (like the S&P 500) and charge nearly nothing to do it.
Put this into practice
Worth tracks your accounts, budgets, and goals — so the concepts in this article aren't just theory.
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