When I click on bold or italics in the toolbar (after highlighting text that I want to convert) nothing happens.
You are right and you are wrong at the same time -:).
If you are accustomed to multiple column page layout and single column wordprocessing in the 1980s and 1990s, then these technologies did not provide properly for typography.
These technologies supported fake styles on the fly, scaling capitals down to small capitals, numbers down to small superiors or small inferiors, and so forth.
These technologies also supported fake cursive (Eng. italics) from antiqua (Eng. roman). In all fairness, they did also select the right deliberately drawn style if available.
In 1994, Apple introduced a model that allowed a glyph to be drawn on the desktop display and deskside printer even if the glyph was not depicted as a character in a character set.
This meant that the type maker could include small capitals, small inferiors, small inferiors, ligatures and much more into the file of type along with user controls to select the composition features.
Rather than have you scale a properly designed capital down to a small capital which is too light and too narrow, Apple's technology lets you pick a small capital without changing font file.
Spelling, sorting, searching - all of this works as it should since you are only changing the stylistics at the level of composed type. You are NOT changing the semantics at the level of coded text.
You could not do this in Aldus PageMaker, Word, QuarkXPress, Nisus, FrameMaker and more with Adobe Type 1 products as you there had to sacrifice your correctly coded text by changing it in order to get correctly composed type. This idea was counterproductive since spelling, sorting, and searching as key to computer communication.
Best wishes,
Henrik