Stocks, Bonds, Pooled Funds - What Are Their Differences? (2024)


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Stocks, Bonds, Pooled Funds - What Are Their Differences?
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It’s back to basics once again for our readers. Why go back to basics? Because only less than 2% of the Filipino population are investing.

It is presumed that almost half of that 1% are plainly putting their money in financial instruments such as stocks, funds, and bonds without even knowing the basic principles and concepts of investing. This shows how much the financial education sector have to work on to teach more Filipinos across the country and abroad.

For today’s post, I will besharing video clips from various resources like Pesos and Sense, Investopedia, and InvestingAnswers.

What Are Stocks and What is the Stock Market?

More Filipinos are starting to become aware about the stock market and are hearing about the good benefits of investing in it for the long-term.

I have been receiving the same question “What are stocks and how to invest in the stock market?”from many of our blog subscribers after several news articles about investing were featured on newspapers and TV recently. Proof that the broadcast and print media have theinfluence to promote financial literacy to its viewers.

Stocks, Bonds, Pooled Funds - What Are Their Differences? (1)

Here’s our friend andfellow advocateAya Laraya with his simple and brief explanation of the basics of stock market investing in Filipino (Tagalog-English).

What Are Bonds?

Government and corporations use this method of debt investment to finance their different projects.

In one of my articles about bonds, we mentioned how investing in this instrument can help the capital preservation goals of many Filipinos, OFW’s included. This article was published when government retail bonds were offered at higher return rates.

However, amidst the booming economy of the Philippines, banks and government institutions havereduced their rates in their fixed income financial products in the past few years. The Philippine Government 3-year bond yields even plunged to an all-time low of 1.625% coupon returns.

Now let’s hear a good voice from Investopedia discussing about this type of debt instrument called Bonds.

What’s the Difference Between Stocks, Bonds, and Pooled Funds?

And to summarize what stocks, bonds, and pooledfunds are, let me share with you a video clip from InvestingAnswers.com.

The video clip also clearly differentiates the meaning of index, mutual, and exchange-traded funds.

Did you enjoy our short learning session today? What are the terminologies and concepts that you still don’t understand? You can share your ideas and comments below to our readers.

Continue receiving information on the basics of saving and investing for yourgoals by subscribing to RockToRiches|BurnGutierrez.Com for FREE.

Rock your way to abundance!

#moneyliferocknroll

Stocks, Bonds, Pooled Funds - What Are Their Differences? (2)

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  1. Nice! 😀


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    Reply

    1. Cheers, Carlos! 😀


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  2. Crystal Clear! better to start investing .. Very informative. .. I will go for Funds..


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    1. Happy investing, Viene! Stocks, Bonds, Pooled Funds - What Are Their Differences? (10)


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  3. For money market fund (where I plan to keep some of my emergency stash), do we have cheque writing privileges already just like in U.S.?


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    1. With funding, I think yes. But let me confirm with BDO and BPI if that’s possible when redeeming.


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  4. i’m glad that i made my first step to start investing. thanks for spreading financial literacy Burn. Stocks, Bonds, Pooled Funds - What Are Their Differences? (11)


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    1. Congratulations on your decision to invest. Spread the good news! Stocks, Bonds, Pooled Funds - What Are Their Differences? (12)


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Stocks, Bonds, Pooled Funds - What Are Their Differences? (2024)

FAQs

What is the difference between stocks and bonds and funds? ›

When an investor buys a stock, part ownership in the form of a share is bought. Bonds are a type of investment designed to aid governments and corporations to raise money. In a mutual fund, money collected from various investors is taken together to buy a large variety of securities.

What are the 2 types of pooled funds? ›

Pooled funds are funds in a portfolio from many individual investors that are aggregated for the purposes of investment. Mutual funds, hedge funds, exchange traded funds, pension funds, and unit investment trusts are all examples of professionally managed pooled funds.

What is the difference between a fund and a stock? ›

Stocks represent shares in individual companies while mutual funds can include hundreds — or even thousands — of stocks, bonds or other assets. You don't have to choose one or the other, though. Mutual funds and stocks can both be used in a portfolio to help you grow your wealth and meet your financial goals.

What is the main difference between pooled funds and mutual funds? ›

Pooled funds involve multiple investors pooling their money for a common investment objective. In contrast, mutual funds accumulate funds from numerous investors to create a diversified portfolio. Finally, composite funds combine various asset classes into a single investment product.

Is it better to invest in bonds or bond funds? ›

Key takeaways. Buying individual bonds can provide increased control and transparency, but typically requires a greater commitment of time and financial resources. Investing in bond funds can make it easier to achieve broad diversification with a lower dollar commitment, but offers less control.

Which is better to invest in stocks or bonds? ›

Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater risk. Bonds are generally more stable than stocks but have provided lower long-term returns.

Is an ETF a pooled fund? ›

Both mutual funds and ETFs are pooled investment funds that offer investors a stake in a diversified portfolio. Investors have many fund choices from which to gain exposure to a wide array of markets, industry sectors, regions, asset classes and investment strategies, as outlined in the fund's prospectus.

What is a pooled fund in simple terms? ›

Pooled funds are investment vehicles such as mutual funds, commingled funds, group trusts, real estate funds, limited partnership funds, and alternative investments. The distinguishing feature of a pooled fund is that a number of retirement boards or investors contribute money to the fund.

Is an ETF a pooled investment? ›

An exchange-traded fund (ETF) is a pooled investment security that can be bought and sold like an individual stock. ETFs can be structured to track anything from the price of a commodity to a large and diverse collection of securities.

What is the difference between bond and bond fund? ›

Bond mutual funds

One key difference between individual bonds and bond funds is that with bond funds, there's no guarantee that you'll recover your principal at a specific time, particularly in a rising-rate environment.

What is a bond fund? ›

What is a bond fund? "Bond funds" and "income funds" are terms used to describe a type of investment company (mutual fund, ETF, closed-end fund or unit investment trust (UIT)) that invests primarily in bonds or other types of debt securities.

Are funds better than stocks? ›

A mutual fund provides diversification through exposure to a multitude of stocks. The reason that owning shares in a mutual fund is recommended over owning a single stock is that an individual stock carries more risk than a mutual fund. This type of risk is known as unsystematic risk.

What are the benefits of pooled funds? ›

The rationale behind instituting pooled funds is to benefit from economies of scale that arise out of gathering large funds from several individual units. The benefit comes in the form of cost minimization and expansion of investment opportunities.

Is a hedge fund a pooled investment fund? ›

A hedge fund is a pooled investment fund that holds liquid assets and that makes use of complex trading and risk management techniques to improve investment performance and insulate returns from market risk.

What are the 4 differences between a stock and a mutual fund? ›

Mutual funds diversify investments, reducing risk, but also limit potential gains. Mutual funds are managed by professionals, reducing the need for monitoring, but investors give up control. Stocks offer higher returns but come with higher risk and volatility.

Are bond funds safer than stocks? ›

In general, stocks are riskier than bonds, simply due to the fact that they offer no guaranteed returns to the investor, unlike bonds, which offer fairly reliable returns through coupon payments.

Why bonds instead of stocks? ›

Generally, yes, corporate bonds are safer than stocks. Corporate bonds offer a fixed rate of return, so an investor knows exactly how much their investment will return. Stocks, however, typically offer a better rate of return because they are riskier.

Where does your money go when you buy a stock? ›

Stocks work like this: Companies sell shares in their business, also known as stocks, to investors. Investors buy that stock, which in turn provides the companies money for expanding their business through creating new products, hiring more employees or other business initiatives.

Can you lose money on bonds if held to maturity? ›

After bonds are initially issued, their worth will fluctuate like a stock's would. If you're holding the bond to maturity, the fluctuations won't matter—your interest payments and face value won't change.

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