Inc. Visiting professor Sang-Koo Nam teaches Investments for the University of Hawai'i at Manoa College of Business Administration. Nam said investing is for everyone. Nam said that even if people do not invest, they still need to understand the functions and structure of the capital market. People need to understand that their retirement funds are invested in stocks and bonds, Nam said. An understanding of investments begins with an understanding of the differences between mutual funds, stocks and bonds.
Stocks are shares of a company.
An investor would have a piece of the company and would share in the risks of the company. Bonds are loans to a company. In exchange for the loan, a company would provide the investor with a promissory note. The yield to maturity are the payments made at specific times based on the face-value of the bond. All securities include a degree of risk.