Investing means putting your money to work by buying assets expected to gain value or produce an income. Before choosing, you need to know the main families of assets and what each one implies.
The share: a piece of a company
Buying a share means becoming a part-owner of a listed company. You are entitled to a fraction of its future profits (dividends) and you benefit from — or suffer — changes in its value. The potential gain is high over the long run, but so is the volatility.
The bond: a loan
A bond means lending money to a state or a company in exchange for regular interest (the coupon) and repayment at maturity. It is generally less risky than a share, but also less rewarding. The main risks: the borrower defaults, or interest rates rise.
The ETF: a ready-made basket
An ETF (exchange-traded fund) tracks an index, for example the S&P 500 or the MSCI World. In a single line, you hold hundreds of companies. It is the simplest and cheapest way to diversify, and the ideal entry point for most investors.
Key point
Share = a piece of a company (high potential, high volatility). Bond = a loan (regular income, moderate risk). ETF = a diversified basket in a single line.
À retenir
- ✓A share makes you a part-owner; a bond makes you a creditor.
- ✓An ETF diversifies instantly and cheaply.
- ✓The higher the expected return, the higher the risk — there is no free lunch.