What You Need to Know About Equities, ETFs, Bonds and Indexes

When it comes to investing, it can be easy to get bogged down in difficult-to-understand terminology. Rather than letting a lack of understanding hold our readers back from getting started on investing, we want to provide an easy-to-understand guide, complete with important terms for getting started, a guide to different platforms you can use to invest, and a cautionary tale on day trading. 

Equities
Also known as stocks, equities are shares issued by a company representing ownership of that company. You can own equity in a publicly traded company, which has a ticker symbol and is offered on an exchange like the New York Stock Exchange or NASDAQ. Starbucks, for instance, is a publicly traded equity. Its ticker symbol is STBX. You can look at its share prices by using Yahoo Finance or Google Finance, and track that in real time.  If you’re thinking about investing, this is likely what you think about purchasing. 

You also may be able to purchase private equity, though this is an asset class that is much more difficult for individuals to access. However, if you own a share of a family business or something like it, that counts as own equities. 

Bonds
Think of bonds as the opposite of equities. Instead of owning a share of the company outright, you own a share of a company’s debt. In effect, you’re lending money to the company, which agrees to pay you back, with interest (this is the interest rate). You can buy bonds from companies, municipalities, countries and other entities. 

The bond market, also called the fixed income market, is a bit more difficult to track. Bonds don’t have public markets in the way that equities do. Instead, you have to do some

Indexes
Indexes are hypothetical groups of stocks and bonds (or both!) that track the performance of the market. The most popular example of an index is the S&P 500, which tracks the market caps (or sizes) of 500 large companies traded on the NASDAQ or the New York Stock Exchange.

ETFs
Exchange-Traded Funds, or ETFs, track indexes to create groups of stocks or bonds that can be traded. They are attractive investments for someone just starting out because they do not require stock or bond picking.