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  • Writer's pictureGeorgi Tonchev

Stocks, bonds, ETFs and Investments Funds


What are stocks?

A stock is a financial instrument that represents a fraction of a company. When you buy stocks, you become a partial owner of a company. A unit of stocks is called a share. There are different types of shares, each having different values, rules or privileges. There are two main types of stocks: common and preferred.

On stock exchanges, stocks can be either bought or sold. These represent the foundation of every investing portfolio. Stocks can be sold or bought on stock exchanges, and the transactions are regulated by governments to prevent fraud and to protect investors.

Companies sell stocks in order to raise funds for their business. A person who buys shares becomes a shareholder. In proportion with the share held, a shareholder benefits from profits, but is also prone to risks. The ownership is determined by the amount of shares a person owns. A company can also buy back the sold stocks, this leads to the investors getting back the initial investment plus capital gains from rises in the stock price.

Each share of stock has a declared par value. The par value is a nominal accounting value that is used in order to represent the equity on the balance sheet of the company. There are cases, in other jurisdictions, when stocks can be issued without a par value.


What are bonds?

Bonds are fixed-income instruments issued by companies that are traded in the financial market. The participants of the financial market can issue new debt (primary market) or buy and sell debt securities (secondary market). Approximately 39% of the bond market is accounted by the United States. A bond is a loan made by an investor to one or multiple borrowers, that are typically corporate or governmental.

There are two types of rates that are paid by the bonds: variable (floating) and fixed rates. Bonds prices go up when rates fall and when rates go up, bond prices fall.

Companies, states and other institutions use bonds in order to finance projects. The owner of the bonds is called debtholder or creditor. The details of the bond include the end date of the main loan and also terms for interest payments made by the borrower. The end date of the bond represents the maturity date, meaning the moment the amount must be fully paid back.

Bonds offer income through the interest payments. Also, if a person keeps the bond to maturity, they will get all the principal back and will have profit if they resell the bond at a higher price.


What are ETFs?

An exchange-traded fund is a type of investment fund that can be bought or sold on a stock exchange just like a regular stock, giving the fact that it has its own price, that fluctuates throughout the day. The ETFs are like a basket of securities that are traded on stock exchanges. They are designed to track specific strategies and to monitor such things as the price of an individual commodity or a large number of securities. Among the types of investments monitored by the ETFs we can mention stocks, bonds, commodities or currencies. The most popular ETFs in the United States replicate indexes such as Nasdaq-100 or S&P500.

Exchange-traded funds offer access to multiple stocks from different industries, they have low expense ratio, tax efficiency, tradability, and also, a risk management based on diversification.

People who own shares of an ETF are called shareholders. They will get annual reports because they indirectly own the assets of the fund. The shareholders will get a share of the profits (interests or dividends).


What are Investments funds?

Investments funds are professionally managed financial instruments. They pool money from investors to buy securities (stock, bonds, money market instruments, derivatives etc.). These investors can be either retail or institutional in nature. Investments funds can be: open-end funds and closed-end funds. Here you can find everything you need to know about investments funds.

At the end of 2019, according to Investment Company Institute, global mutual fund assets were 54.9 trillion dollars.


Top five countries with the biggest mutual fund industries are:

  1. United States of America: $26.7 trillion

  2. Australia: $6.3 trillion

  3. Ireland: $3.4 trillion

  4. Germany: $2.5 trillion

  5. Luxembourg: $2.2 trillion


In the European Union, funds are governed by laws and regulations established by each country, but the EU accepts that mutual funds regulated in a country can be sold in all other countries.

The biggest investment funds from Romania by net asset value are bonds funds. These funds have a lower level of risk, but their yield is also lower than other types of funds. In the chart below you can see top three bonds’ investments funds from Romania:



The biggest stocks investment fund from Romania is NN (L) International Romanian equity. In the chart bellow you can see the current top 3 stocks investments funds by net asset value:


The performance of investment funds that are tying to balance their holding for optimum risk-reward rate is much different. Those asset managers invest in different financial instruments, on different markets and with their own asset allocation. You can see in the chart bellow how different are the yields of the top 3 mix-funds from Romania:


Among the advantages mutual funds have, we can mention diversification, liquidity, service, government convenience and oversight, professional investment management and transparency. On top of that, Monett offer a marketplace of funds so you can analyze, pick and invest the best suitable investments funds for your needs. You don’t need to wary about going to banks to open new accounts, you just sell and buy different units funds from our app.


Don't settle for less, maximize your profits!


Andrei-Gabriel Vultur,

Chief operating officer

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