Investment types and containers

Putting money into assets with the goal of growing my wealth over time

investing

ownership in a company

stock

a loan that investors make to a company or government in exchange for interest payments

bond

money paid to someone for borrowing their money

interest

what is the principle of a bond?

the principle is the original amount of money that was loaned

why do companies issue stock?

to raise money by selling ownership in the company

why do companies issue bonds?

to borrow money that they will repay with interest

pooled money from many investors to buy a diversified portfolio of investments. it trades once per day after the market closes

mutual fund

a fund that holds many investments and trades throughout the day like a stock

ETF (exchange-traded fund)

what do mutual funds and ETFs have in common?

both pool money from many investors to own a collection of investments

what is the biggest difference between a mutual fund and an ETF?

mutual funds trade once per day after the market closes, while ETFs trade throughout the day

what is an index fund?

an index fund is a fund that follows a specific market index instead of trying to beat it

is an index fund a type of mutual fund?

sometimes. an index fund can be structured as a mutual fund

can an ETF be an index fund?

yes, an ETF can also follow an index

what does index describe?

it describes the investment strategy, not the type of investment

what is an actively managed fund?

a fund where a manager chooses investments in an attempt to outperform the market

what is a passive fund?

a fund that follows an index instead of having a manager actively choose investments

can a mutual fund be passive?

yes, mutual funds can be passive OR active

can an ETF be passive?

yes, an ETF can be either passive or active. as we’ve gone over active or passive refers to the strategy of a fund

what does the positions tab show?

the investments that I currently own

how is current value calculated?

shares x current price

what does the balances tab show?

where my money is in my account?

what is cash available to trade?

money that is ready to be invested

when to mutual funds execute?

once per trading day after the market closes

if I buy a mutual fund before the market closes, when does it execute?

after the market closes that same trading day

if i buy a mutual fund after the market closes, when does it execute?

after the next trading days market close

a payment that some companies or funds distribute to shareholders from earnings

dividends

what is dividend reinvestment?

automatically using dividends to buy additional shares of the investment

what is cost basis?

the total amount of money I’ve invested in a specific investment.

what question does the positions tab answer?

what do i own?

what question does the balances tab answer?

where is my money?

what question does the activity & orders tab answer?

what have I done with my account?