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Bonds are promissory notes or IOUs issued by a corporation or government to its lenders. They are usually issued and traded in multiples of $1,000. A bond is evidence of a debt on which the issuing company usually promises to pay the bondholder a specified amount of interest at intervals over a specified length of time, and to repay the original loan on the expiration date. A bond represents debt; therefore, its holder is a creditor of the corporation and not a part owner, as the stockholder is.
Mutual Funds
In a mutual fund, investors pool their money to achieve a common objective, with a professional money manager buying and selling securities for the fund. Mutual funds allow you to buy hundreds of different stocks, bonds and money market instruments under one investment umbrella. Over the past two decades, mutual funds have emerged as one of today's most popular investments.
The benefits of mutual funds include reduced risk through diversification, increased liquidity, and, in many cases, a degree of flexibility that will allow you to switch investments within a fund family.
Of course, mutual fund shares do fluctuate with market conditions and carry various degrees of risks depending on the individual fund's objectives. You should always read the individual fund's prospectus for complete information regarding charges, expenses, and possible risk factors.
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Source: www.royalalliance.com
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