A CERTIFIED FINANCIAL PLANNER with over a decade of experience in the finance industry, Ms. Karas started in life insurance then quickly moved into investment research before pursuing her love for financial planning.

1. What Goes Up, Must Come Down
I think it’s time for us to touch upon INVESTMENTS! There are
so many different investment types and investment vehicles
out there. But let’s all be honest; the average investor really
has the same type of investments in their portfolio. Most
people have heard all of the below terms before, probably
hundreds or thousands of times, and I constantly come across
people who don’t know what they are. So.. here you go.
Stocks (or equity)
A stock is a share of ‘ownership’ that is issued by a Company
to raise funds. Stock represents a claim on the company’s
earnings (and losses). Many people confuse owning shares of
a company with actually owning a piece of the company, this

2. is incorrect. The chairs and tables at the corporate office still
belong to the corporation – not to the shareholders. Owning
stock gives you the right to vote in shareholder meetings,
receive dividends (which are the company’s profits) if and
when they are distributed, and it gives you the right to sell
your shares to somebody else.
If you own a majority of shares, your voting power increases
so that you can indirectly control the direction of a company
by appointing its board of directors. Not so relevant to the
average person, but very relevant when a company buys over
another company. Financial Planning Consultant Port
Washington
Stocks are issued by companies to raise capital in order to
grow the business. By buying shares of the company, you’re
essentially betting that you will make money because the
company will grow or profits will increase. Just keep in mind,
companies don’t always grow, and very often they go bust –
so you know, you’re risking losing all of your money as well.
Bonds
Bonds are fundamentally different from stocks. Bonds are a
personal loan that purchasers of bonds are giving to a
company, government, or municipality. Bondholders are
creditors to the corporation, municipality, or government, and
are entitled to interest as well as repayment of principal.
Creditors are given legal priority over other stakeholders in the
event of a bankruptcy and will be made whole first if a

3. company is forced to sell assets in order to repay them. This
inherently makes them significantly safer, and less risky, than
stocks. Shareholders are last in line and usually receive
nothing, or a few pennies, in the event of bankruptcy.
On the flip side, bondholders are ONLY entitled to receive the
return given by the interest rate agreed upon by the bond,
while shareholders can get great returns generated by
increasing profits, theoretically to infinity.
Bonus point: many municipal and government issued bonds
are tax advantaged. For instance, a New York City (NYC)
resident owning a NYC school bond will pay not taxes on the
interest received from the bond.
Mutual Funds
A Mutual Fund is an investment vehicle made up of a pool of
monies collected from many investors for the purpose of
investing in securities, such as stocks, bonds, money market
instruments, and other assets. Mutual funds are operated by
professional money managers, who allocate the fund’s
investments and attempt to produce capital gains and/or
income for the fund’s investors. A Mutual Fund will usually
have a stated investment objective and as such, the
investments are made to align with the stated objective.
When thinking about how these operate- just remember –
MUTUAL. All the expenses are shared, all the costs are shared,
all the gains are shared, and, of course, all of the losses are
shared. The amount of each that a shareholder of the fund will

4. experience is directly proportional with the amount of the
fund that the shareholder owns. When you buy a share of a
mutual fund, you are actually buying the performance of its
portfolio. Certified Financial Advisor Port Washington
A mutual fund is both an investment and an actual company.
This is strange, but is actually no different than how a share of
AAPL is a representation of Apple, inc. When an investor buys
Apple stock, he is buying part ownership of the company and
its assets. Similarly, a mutual fund investor is buying part
ownership of the mutual fund company and its assets. The
difference is that Apple is in the business of making computers
and smartphones, while a mutual fund company is in the
business of making investments.
Exchange Traded Funds (ETF)
An ETF is a type of fund that owns the underlying assets
(shares of stock, bonds, oil futures, gold bars, foreign currency,
etc.) and divides ownership of those assets into shares.
Shareholders do not directly own or have any direct claim to
the underlying investments in the fund, but they do own these
assets indirectly. ETF shareholders are entitled to a proportion
of the profits, such as earned interest or dividends paid, and
they may get a residual value in case the fund is liquidated.
The ownership of the fund can be easily bought, sold or
transferred in much the same way as shares of stock.
An ETF is a marketable security that tracks an index, a
commodity, bonds, or a basket of assets like an index fund.

5. Unlike Mutual Funds, an ETF trades like a common stock on a
stock exchange. ETFs experience price changes through the
day as they are bought and sold and typically have higher daily
liquidity and lower fees than mutual fund shares.
By owning an ETF, investors get the diversification of an index
fund as well as the ability to sell short, buy on margin, and
purchase as little as one share (there are no minimum deposit
requirements). The expense ratios are significantly lower than
those of the average mutual fund.
There are like 23074896237894678236 different types of
investments and investment vehicles out there by these 4 are
usually the core of any diversified portfolio and the core of
most newspaper articles out there. So now when someone
talks about Mutual Fund expense ratios in Investment News,
you know a little more about what they’re referring to and
why it matters.
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