Unit 2 · Level 1 · The instruments
Review: The toolkit
Quick tour of the toolkit: stocks make you a part-owner chasing growth. Bonds make you a lender collecting coupons. Funds pool thousands of investors to buy whole baskets in one purchase, with ETFs trading all day like stocks. Cash and friends keep the lights on. Owning, lending, pooling, parking: that's the entire menu in four words.
Free to play. No ads, no token, no account needed to start.
What you get asked
Stock versus bond: what's the core difference?
Owner versus lender decides everything downstream: owners get the upside and the risk, lenders get the promised payments and the queue-jump if things go wrong.
Stocks may pay dividends; bonds pay ___.
Dividends are a share of profits and can vary or vanish; coupons are promised interest on a loan. Different words because they're different promises.
Match each instrument to what you become when you buy it
Always ask 'what am I when I hold this?' Owner, lender, or parker: the answer tells you what can go right and what can go wrong.
Which statement about ETFs is TRUE?
Exchange-traded is the clue in the name: live prices all session long, unlike classic mutual funds priced once daily.
In 2022, central banks raised rates sharply. Why did 'safe' government bonds lose over 10% that year?
Rates up, existing bond prices down: the see-saw never sleeps. 'Safer than stocks' was still true; 'can't lose money' never was. Toolkit mastered. 🐜
The rest of this unit
Stocks, bonds, funds and cash: what you're really buying.