Stocks and Bonds Basics
Understand why a stock (or share) represents fractional ownership of a company.
10
Lessons in this module
What a stock is
Understand why a stock (or share) represents fractional ownership of a company.
Company ownership rights
Understand why three core shareholder rights: (1) Voting — proportional say in major decisions, (2) Dividends — share of profits when declared, (3) Residual claim — if company liquidates, shareholders receive what remains after all creditors are paid.
Dividends
Understand why dividends are discretionary — boards decide.
Nigerian Stock Exchange (NGX)
Understand why the NGX plays two roles: (1) primary market — companies raise capital through IPOs (Initial Public Offerings), (2) secondary market — investors trade existing shares among themselves.
How to buy stocks in Nigeria
Understand why market order: execute now at best available price — certainty of execution but price uncertainty.
What a bond is
Understand why bond vs stock: Bond = you are the lender (creditor).
FGN Bonds
Understand why fGN bond advantages: (1) sovereign guarantee — near-zero default risk in normal circumstances, (2) predictable coupon income (regular cash flow for income investors), (3) some FGN bond interest is tax-exempt (check current rules), (4) liquidity — tradeable on the FMDQ (FI market).
Corporate bonds
Understand why corporate credit risk: companies can go bankrupt, cease operations, or restructure debt at haircuts to bondholders.
Bond yield explained
Understand why coupon rate is fixed at issuance.
Bonds vs stocks
Understand why flight to safety: during crises or recessions, investors sell stocks (rising risk) and buy bonds (safe haven).
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