Points to know
- The main markets you'll hear about are stock markets, but bond markets are sometimes newsworthy as well.
- If you own a generous portion of stocks, you'll probably see a correlation between the behavior of the stock market and your account balance.
Usually refers to common stock, which is an investment that represents part ownership in a corporation. Each share of stock is a proportional stake in the corporation's assets and profits.
A bond represents a loan made to a corporation or government in exchange for regular interest payments. The bond issuer agrees to pay back the loan by a specific date. Bonds can be traded on the secondary market.
The sum total of your investments managed toward a specific goal.
The strategy of investing in multiple asset classes and among many securities in an attempt to lower overall investment risk.
What's a "market," anyway?
While listening to business reports on the news, you might hear something like, "The markets were up today" or "A market plunge continued for the third day in a row." What does this mean?
"Market" is a term that, loosely defined, means "the buying and selling of related securities." You could talk about "the stock market" and mean "all stocks traded in the United States," for example.
Most excitement—and fear—relates to the stock market because stocks can increase or decrease in value very quickly. But there are bond markets too.
If you own a broadly diversified portfolio that includes stocks from all segments of the U.S. market, increases in the market will likely translate into increases in your balance. Of course, the reverse is also true.
It's the relationship between what's reported on the news and what happens to your personal finances that makes following the markets so irresistible.
But don't get too caught up in day-to-day financial market news. Over long periods of time, ups and downs tend to smooth out.
All investing is subject to risk, including the possible loss of the money you invest.
Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.
Bonds are subject to the risk that an issuer will fail to make payments on time and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. Investments in bonds are subject to interest rate, credit, and inflation risk.
Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.