Curricular Response –
1. Stock vs Bond
a. What is the difference between a stock and a bond?
The two main differences between a stock and a bond are: with stocks a person owns a small portion of a company, whereas with bonds it is loaning a company or government money. Another difference is that stocks must grow in resale value, while bonds pay fixed interest over time.
b. Which security tends to have the best returns?
It depends; however, the stock market is considered to offer the highest investment returns over time. Higher returns, however, come with higher risk.
c. How are risk and return connected?
Stock prices typically are more volatile than bond prices, therefore risk and return are connected, the most that with risk, probably the less or most return that we can get.
d. What are some steps you could take to mitigate riskwhile investing in the stock market?
According to Paras, 2023, some steps can be: Diversification, that means spreading your investments across different types, like stocks, industries, and regions.
This can help lower risk because if one investment does poorly, others may do well, balancing things out.
A second step can be research, because it is important to understand what you invest in by looking at past data and future possibilities.
Then, set clear goals for your investments that are specific, and time bound. Don’t try to time the market; focus on long-term strategies.
Finally, it is important to stay updated on financial news and maintain an emergency fund for unexpected situations.
2. Balance
a. What does it mean to have a “well balanced portfolio?”
A balanced portfolio is an investment portfolio that includes a mix of different asset classes, such as stocks, bonds, and sometimes other investments like cash or alternative assets. The primary goal of a balanced portfolio is to achieve a balance between potential growth and capital preservation while managing risk.
b. What is “rebalancing” a portfolio and why is it important?
“Selling some assets in your portfolio and buying others to help maintain your target asset allocation” (Stanley, 2023).
Core Competency Self Assessment
1. How much information did you use to help you with answering the above questions?
I research different online references to answer the different above questions.
2. Has investing become a more approachable or attainable concept to you?
Investing has become a topic on interest to me now that I understand some important meanings and differences, specially between bonds.
3. What is something that you have learned which you have changed your mind about?
I used to hear about bons in news an in-adult conversations without understanding well about it. However, before researching, reading to answer above questions I understand the difference between stocks and also the real meaning of bons.
References:
Paras. 2023. https://www.linkedin.com/pulse/10-effective-ways-reduce-risks-investments-paras-financial-planner/