Investing · explained

What an investor actually holds.

7 pages, one for each thing a long-term investor meets. Each says what it is, how it works, what it costs and where people go wrong, and each has one working example to move with your own hands. None of them says what to buy.

See the seven Investing or trading?

The instruments

Seven things, one page each.

The first five are what most long-term savings are made of. The last two are contracts built on top of other things; an investor meets them sooner or later, and they behave very differently.

Two different things

Investing and trading are not the same activity.

They use the same markets and some of the same words, and that is where the likeness ends. Most of this website is about trading. These pages are about the other one.

Neither is safe. A long time in view makes a loss less likely to be permanent; it does not make it impossible, and money that will be needed soon is exposed to whatever the market does before then.

The time in view

InvestingYears or decades. The holding is meant to be left alone.

TradingMinutes to weeks. The position is meant to be closed.

Where the result comes from

InvestingWhat the holdings earn and pay over time: profits, dividends, interest. Prices follow, unevenly.

TradingThe change in a price over a short period, in either direction.

What it costs

InvestingMostly a yearly charge on the amount held. Dealing is rare, so its cost is small beside it.

TradingA spread or commission on every trade, and financing on positions kept open. The cost rises with every trade made.

Borrowed exposure

InvestingUsually none: the money at work is the holder’s own, and the most that can be lost is what was put in.

TradingOften used. It multiplies gains and losses alike, and a loss can arrive faster than it can be acted on.

What it asks of the person

InvestingPatience, and the nerve to do nothing during a fall.

TradingConstant attention, a method and the discipline to keep to it.

Side by side

What the holder has, in one line each.

Instrument	What the holder has	How it is usually priced	Has an end date
Stocks	A part of a company	On an exchange, through the day	No
Bonds	A loan to a government or a company	Between dealers, through the day	Yes: maturity
ETFs	Units of a fund that holds a basket	On an exchange, through the day	No
Mutual funds	Units of a pooled fund	By the fund, once a day	No
Index funds	Units of a fund that holds a whole index	As an ETF or as a mutual fund	No
Options	A right to buy or sell at a set price	On an exchange, through the day	Yes: expiry
Futures	An obligation to buy or sell at a set price	On an exchange, through the day	Yes: expiry

Reference dataGeneral descriptions of how these instruments usually work. Details differ by country, market and product. Educational information, not investment advice or a recommendation to trade.

The value of any investment can fall as well as rise, and an investor can get back less than was put in. Futures, and options that have been sold, can lose more than the amount first put down.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.

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Investing and trading are not the same activity.

They use the same markets and some of the same words, and that is where the likeness ends. Most of this website is about trading. These pages are about the other one.

Neither is safe. A long time in view makes a loss less likely to be permanent; it does not make it impossible, and money that will be needed soon is exposed to whatever the market does before then.

What the holder has, in one line each.

Instrument	What the holder has	How it is usually priced	Has an end date
Stocks	A part of a company	On an exchange, through the day	No
Bonds	A loan to a government or a company	Between dealers, through the day	Yes: maturity
ETFs	Units of a fund that holds a basket	On an exchange, through the day	No
Mutual funds	Units of a pooled fund	By the fund, once a day	No
Index funds	Units of a fund that holds a whole index	As an ETF or as a mutual fund	No
Options	A right to buy or sell at a set price	On an exchange, through the day	Yes: expiry
Futures	An obligation to buy or sell at a set price	On an exchange, through the day	Yes: expiry

Reference dataGeneral descriptions of how these instruments usually work. Details differ by country, market and product. Educational information, not investment advice or a recommendation to trade.