Mergers vs. acquisitions

Q What’s the difference between mergers and acquisitions? — H.W., online

AIn general, a merger is when two companies (often of roughly similar size) combine to form a new company, often with a new name and new shares of stock issued. Acquisitions, which happen far more frequently, are when one company takes control of another. While mergers are often friendly and a joint effort, acquisitions can be hostile.

Famous mergers include Exxon and Mobil (forming Exxonmobil), Citicorp and Travelers Group (forming Citigroup), AOL and Time Warner (forming AOL Time Warner), Royal Dutch Petroleum and Shell Transport & Trading (forming Royal Dutch Shell) and Sirius Satellite Radio and XM Satellite Radio (forming Sirius XM Holdings).

Examples of acquisitions include Microsoft buying Linkedin, Amazon.com acquiring Whole Foods Market and CVS Health buying Aetna. Some acquisitions, such as when Disney bought Pixar or when Daimler-benz bought Chrysler, are referred to as mergers, in large part to honor the acquired company and let it save face.

Q I’m new to investing, have several thousand dollars and want to start buying stocks. How should I invest my money so that it’s safe and grows? — C.D., Keene, New Hampshire

AYou’d do well to take some time to read up on investing first. Some stocks are less risky than others, but none are risk-free. Consider investing your money in a certificate of deposit (CD) for a few months or a year while you learn more.

A low-fee, broad-market index fund, such as one based on the S&P 500, is a good way to enter the stock market; for many people, that can be all they need. If you want to learn how to invest in individual stocks, keep reading, and visit us at Fool.com.