When a bond is purchased, your money is lent out to a company or government. In return, they agree to give you an interest on your money and eventually pay you back the amount you lent out. Bonds in a way are quite safe and stable but they come at a cost. Because there is little risk, the returns are also limited.
Stock is a security issued in the form of shares that represent an ownership interests in a company. The owners of the company’s stock are called stockholders or shareholders and they receive profit or loss of the company as per the percentage of stock they own. The benefit of owning a stock is that you profit as the company profits. However, stocks are volatile as they fluctuate in value on a daily basis and the returns aren't guaranteed. But the upside is that equities have relatively higher potential returns when compared to bonds.
Quite simply, a mutual fund is a mediator that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. Thus, investment in mutual funds is one of the most viable investment options for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
Alternative investments: Options, Futures, FOREX, Gold, Real Estate, Etc.
Besides debt and equity, there are alternative investment instruments which are generally high-risk but high-return options which need expertise before going any further. For a novice, these are the territories best left unchartered.