So what's the difference between Stocks (shares of the company) and Bonds and Mutual Funds?

Stocks are ... well, shares of a company.

Bonds are debt. By buying a bond, you are loaning the company a certain amount of money (however many bonds you buy). In return, the company is promising to pay back the principal at a certain interest rate at a given time. It's a mini loan, I guess you could call it.

There are also many, many different types of other debt, known as "notes." Senior, subordinated, secured, unsecured - those determine your place in the creditors' line if a company goes bust. Convertible notes give a company the right to call the debt and exchange it for common stock (swapping the debt - a liability - to boost equity, in accounting terms).

Mutual funds are exactly what the name suggests: You buy into a cooperative fund and some schmuck decides how to invest that money for you. It's considered a good way to invest since the risk is spread across a wide variety of stocks and bonds, but you have to be careful about how fund managers allocate the money.

I would explain that whole mutual fund scandal from two years ago, but, not now. Maybe a little later.

So bonds would be a safe investment, because it's for a specified term, and they earn interest, like a savings account?

I forgot to explain how bonds are classified, high yield (junk), low yield etc., but now it's busy at work and no time.

Safe investment, but very limited returns and possibility of bankruptcy, in which case you might get squat.

sorry if some of the posts don't make sense - i had to delete a couple of my posts as i received a notice today that regulators are trolling bulletin boards and will now hold firms responsible for anything that a broker says in a bulletin board.

No one knows who you work for or even who you are. So what if a regulator sees someone offering to anonymously explain the stock market.

Besides, if any regulator sets foot in here, LJ and I will take care of him for you :)

stupid paranoia on my part i'm sure, but it is amazing what can happen when a regulator gets a woody for something.

i really can't give investment directions or suggestions to someone in a state that i am not licensed in. even more tricky is that this is an environment where i cannot reasonably control who would follow my directions... it sounds stupid, but i'm just playing CYA.

Frankly, I don't blame you for your discretion.

I think there is probably enough information in terms of the basic nuts and bolts of the operation of the market that you could provide us without problems.

I've often been curious, but never curious enough to get the "For Dummies" guide.

if enough people were actually serious and wanted real info, i can license myself any place i want in about 2 days, but if there isn't a reason too, then why spend the $$$.

*except NY - EFF NY! they know that there is a high concentration of 7 licenses in NY so they charge an exorbitant fee there - a fee that i will not pay on principle.

i'll still answer any questions i can here, i just need to be more careful when pressing the submit button.

and if you come across any old threads where i've identified myself or my firm (i know i did, but i can't remember where)- please send me a note so i can get rid of that?

Could we go back a bit please, because I still don't understand how there's always a buyer for a stock being sold, even if it's in a desperate tailspin heading for delisting ...

you know the addage about a sucker being born every minute? there is always someone who thinks that ABC is a bargain.

but at some point the market does dry up. I have had instances where there was "no market" for my client's shares. it happens quite a bit when someone buys penny stocks - they tend to go bad and no one wants to buy. in that case, the holder of those shares gets to just keep hanging on to them. it is sort of like real estate - it is only worth something if someone wants to buy it.

for the most part though, there is always an open order to buy of ABC and an open order to sell of ABC. The "market maker's" (the people in the colored coats) are there to match the two up and charge a fee along the way.

Hey, dude, happy cellar one year and 20 day anniversay ... (I just noticed).

There's always a buyer for major market stocks, though, because there are hundreds of people that only buy and sell on the basis of trying to figure out where the right price actually is. And most stocks are not playing Enron-style games with their markets, because they can't. Even if IBM doesn't sell a single computer, their intellectual property, their people, their customer base etc is worth a great deal.

thanks wolf - if i'm only one, why does my body ache this way?

UT - yu are correct.