Stocks, bonds and commodities
The main things people invest in, and how they differ.
Beyond shares, there are several other major 'asset classes'. Understanding the main ones makes financial headlines far easier to follow, because money constantly flows between them depending on how confident or nervous investors feel.
Stocks
Stocks (shares) offer ownership in companies and the potential for higher returns, but with more ups and downs. They are the classic 'risk-on' asset — they tend to do well when investors are optimistic about growth.
Bonds
A bond is essentially a loan to a government or company that pays regular interest and returns the original sum at the end. Bonds are generally steadier than stocks and are seen as safer, which is why nervous investors often move money into them. Government bond 'yields' — the interest they pay — are watched closely because they reflect expectations for interest rates and the economy.
Commodities and currencies
Commodities are raw materials such as oil, gold and wheat. Oil prices ripple through the whole economy, while gold is often treated as a safe haven in uncertain times. Currencies — like the US dollar or the euro — also trade against each other around the clock, and a strong or weak dollar affects everything from company profits to commodity prices. Nothing on this site is financial advice.
