How much do you know about investing? DO you know anything? Have you ever even heard the words stocks, bonds, and mutual funds? If not, that’s okay. You can learn the basics very easily.

Before you can invest in the stock market, you should know what you’re doing. A company cannot be traded on an stock exchange until it has gone public. When a company is public, it can issue shares of stock which can be bought and sold. Your goal is to purchase stock at one price and sell it for a higher price to make a profit.

Owning a share of stock means you own part of the company. The firm issues stock in order to raise money for their company to grow. If you own stock, you are a shareholder. As a shareholder, you are able to vote in the company and have some say. Although, usually you just vote on who you want to be on the board of directors, and they make decisions for the firm.

Stocks are different from bonds in that they are equity instruments. With a stock you own part of the company. When you buy a bond, you are lending the company money. When a company needs to borrow money, they sell bonds. When you buy a bond, they give you an interest rate which is what you earn on the bond.

You can hold a bond until it matures or you can sell it. Bonds can be traded. Government bonds are the least risky investment and corporate bonds having ratings to show how risky they are.

Bonds are rated by letters. For example, a AAA is the highest rating which means it has the lowest risk by those usually have the lowest return as well. They are rated also as BBB, CCC, etc. The lower they go, the riskier they are.

Mutual funds are a mix of stocks and/or bonds. They work by pooling together a bunch of peoples money and a fund manager invests the money in several different investments for you.

Mutual funds are great for new investors or for those who aren’t interested in buying their own stocks but want a diversified portfolio. No-load funds are a popular choice because they charge no fees.