What is the difference between a stock, a bond, and an ETF?

A stock is a fractional ownership stake in a single company. Its value rises and falls with the company's fortunes. A bond is a loan you make to a company or government; they pay you regular interest and return the principal at maturity. Bonds are generally less volatile than stocks but also offer lower long-term returns. An ETF (Exchange-Traded Fund) is a basket of many stocks or bonds bundled together and traded on an exchange like a single stock. A broad-market ETF (such as one tracking the S&P 500) gives you instant diversification across hundreds of companies in one purchase, which is why low-cost ETFs are the core building block recommended for most long-term investors.