Definition

Equity, or stock, represents partial ownership in a company. Shareholders can benefit from price appreciation and dividends, but also bear the risk of loss. Over long periods stocks have delivered higher returns than bonds or cash, which is why they anchor most long-term growth portfolios despite short-term volatility.

1. Bond

   A loan to a government or company that pays interest and returns principal at maturity.
2. Dividend

   A share of company profits paid out to shareholders, usually in cash.
3. Index Fund

   A fund that tracks a market index instead of trying to beat it.