Lesson 3 – Stock brokers Bonds and Mutual funds

Stock brokers

A stock broker is a regulated professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells stocks and other securities for both retail and institutional clients, through a stock exchange or over the counter, in return for a fee or commission. Stockbrokers are known by numerous professional designations, depending on the license they hold, the type of securities they sell, or the services they provide. In the United States, a stockbroker must pass both the Series 7 and Series 63 and or Series 66 exams in order to be licensed.
In most English speaking venues, the two word term stock broker, like stock brokerage, normally applies to the brokerage firm, rather than to the individual.

Today you can find online stock brokers (also known as internet stock broker) that will give you usually better terms an commissions


a bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) or to repay the principal at a later date, termed the maturity. Interest is usually payable at fixed intervals (semiannual, annual, sometimes monthly). Very often the bond is negotiable, i.e. the ownership of the instrument can be transferred in the secondary market.
Thus a bond is a form of loan or IOU: the holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor), and the coupon is the interest.

Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure.Certificates of deposit (CDs) or short term commercial paper are considered to be money market instruments and not bonds: the main difference is in the length of the term of the instrument.

Bonds and stocks are both securities, but the major difference between the two is that (capital) stockholders have an equity stake in the company (i.e. they are owners), whereas bondholders have a creditor stake in the company (i.e. they are lenders). Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely. An exception is an irredeemable bond, such as Consols, which is a perpetuity, i.e. a bond with no maturity.

Mutual fund

mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities.

While there is no legal definition of the term “mutual fund”, it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as “investment companies” or “registered investment companies.” Most mutual funds are “open-ended,” meaning investors can buy or sell shares of the fund at any time. Hedge funds are not considered a type of mutual fund.The term mutual fund is less widely used outside of the United States and Canada.
Mutual funds have both advantages and disadvantages compared to direct investing in individual securities. They have a long history in the United States. Today they play an important role in household finances, most notably in retirement planning.There are 3 types of U.S. mutual funds: open-end, unit investment trust, and closed-end. The most common type, the open-end fund, must be willing to buy back shares from investors every business day. Exchange-traded funds (or “ETFs” for short) are open-end funds or unit investment trusts that trade on an exchange. Open-end funds are most common, but exchange-traded funds have been gaining in popularity.Investors in a mutual fund pay the fund’s expenses, which reduce the fund’s returns/performance. There is controversy about the level of these expenses. A single mutual fund may give investors a choice of different combinations of expenses (which may include sales commissions or loads) by offering several different types of share classes.

Lets continue and learn more…

Next: Lesson 4 – Hedge funds and FOF