Page 44

Bond Market — Bonds are certificates of debt issued by organizations that borrow money from the public with a promise to return the initial investment (principal) plus interest. Investors can buy bonds from the issuing organizations or from other bond owners through the bond market.

Futures Market — Futures are contracts entitling the buyer to receive a certain amount of goods at a certain price at a certain time in the future. Futures contracts can be bought from the issuers or other contract owners.

Stock Market — The most popular security of them all, stocks are ownership rights in a particular organization. They are initially purchased from the originating company, later to be bought and sold in the stock market.

Options Market — Options are rights to buy or sell a certain number of securities (e.g. stocks, futures) at a certain price by a certain time.

Mutual Funds — There really is no such thing as a mutual fund market (i.e., no mutual fund exchange, except for the closed-end type). A mutual fund is a managed pool of investment in several types of securities such as stocks or bonds. They are offered by investment firms, and their prices change according to their underlying securities.

Well, that was easy. Right? Wrong. As you open the door to any one of these investment vehicles you will soon find out that each consists of a countless number of options — enough to make your head spin. Then how will you ever determine which type of investment best suits your needs? We will cover each investment vehicle in detail in the following chapters, but first the question you need to ask yourself is why do you want to invest? The answer will give you a good indication as to which types of investment(s) best suit your needs. Just answering “to make money” is too broad and isn’t useful in determining your investment strategy. Here is a list of some of the areas you may need to address as an investor: …