EquiFi

A bond is a loan, not a share of ownership. When you buy a bond, you lend money to the issuer — a government, a company, or another borrower — and the issuer promises to pay you interest for a set period and return the principal when the bond matures. That promise, and how much it is worth if you need to sell early, is the whole subject of this guide. A bond is a loan with written terms Buying a stock makes you a part-owner. Buying a bond makes you a lender. The issuer gets money now and owes you scheduled payments later. You do not get a vote in how the issuer is run, and you do not share directly in its profits beyond the interest it promised. In return, your claim usually ranks ahead of shareholders if the issuer runs into trouble — ahead does not mean guaranteed, as the risks below show. Four terms define a plain bond. Face value, also called par value, is the principal the issuer promises to repay at maturity. The coupon rate is the annual interest rate stated as a percentage of f...

An index fund is a fund that tries to match a published market index, not beat it. It buys the securities in that index, in roughly the proportions the index sets, and it changes its holdings mainly when the index changes. That single design choice explains most of what follows: broad exposure, low trading, and returns that track the market it follows, minus fees. What an index is, in plain terms An index is a list with rules. It names a group of securities — for example, 500 large U.S. companies — and a method for weighting them, often by market value. You cannot buy an index directly. An index fund is the vehicle that turns that list into something you can own: it holds the securities on the list so your money moves with the group, rather than with one company’s fortunes. How the fund copies the index Some funds buy every security in the index. That approach is called full replication, and it works best when the index is not too large or hard to trade. Other funds use sampling: they ...