Audio Resource: What’s a Stock, Bond and Mutual Fund?

This fifteen minute podcast from Motley Fool (start at 1:00 and finish around 16:00) is a good homework assignment prior to your unit on investing.  The three personal finance experts answer a listener’s question (Ok, it’s really not a question):

When my friends start talking about investing, I just sort of nod my head and pretend to know what they’re talking about. I have been doing this for so long I’m too embarrassed to admit that I don’t know the difference between a stock, a bond, and a mutual fund. Help me sound smart.

As students listen, have them key in on the following questions:

  • What is a stock?  What does a shareholder own when they own stock in a company?
  • What is a bond?  How does it differ from a stock?  Generally speaking, do bonds tend to be more or less risky then stocks?  How does a bondholder get paid?
  • What is a mutual fund?  What is the difference between an actively managed fund and a passive mutual fund?  Which do you think you would prefer and why?  Why do people invest in mutual funds instead of individual stocks?