In this class we explore the second group of asset classes that you as an individual can invest in.
Investing #103 - Asset Classes: Mutual Funds, ETFs, Commodities
Mutual Funds - these are pooled investments. Imagine you had a shopping basket, with milk, eggs, bread, sugar, tea, biscuits, cereal etc in it. A mutual fund works in a similar way: it is a 'basket' that contains hundreds of investments, ranging from shares in your favourite companies (Apple, Amazon) to bonds of the Brazilian government and companies in Africa!
The benefit of mutual funds is that they give you a lot more exposure (you're investing hundreds vs 10 items) and lower risk (of the money you have invested going down in value).
They make it cheaper to invest! Buying just one share in Apple could cost you £200, but you can invest as little as £100 in a mutual fund that invests in Apple. Find out exactly how this works when you watch.
ETFs - similar to mutual funds, with the added feature of being listed on a stock market. In effect, they give you the exposure of a mutual fund, but trade like you're buying and selling shares in Google.
Commodities - any product whose value does not depend on the company making it. e.g. gold, silver, oil, coffee, wheat, sugar. The price of an iPad depends on the price Apple decides to charge. The price of commodities do not depend on the company: they are determined by what are known as 'market forces' - how much of it is available vs how many people want to buy.