Diversify Your Investments

When it is time to invest it is important to not put all your eggs in one basket. You could suffer huge losses in the event that one investment does not work. A better strategy is to diversify your portfolio across different categories of investments, including stocks (representing shares in the individual companies), bonds and cash. This helps to reduce investment returns fluctuations and allows you to reap the benefits of higher long term growth.

There are many kinds of funds. These include mutual funds exchange traded funds, mutual funds and unit trusts. They pool funds from a variety of investors to purchase bonds, stocks as well as other assets, and then take a share of the profits or losses.

Each type of fund has its own unique characteristics and risks. Money market funds, for instance are a type of investment that invests in short-term securities issued by the federal, state, and local governments, or U.S. corporations and generally have low risk. Bond funds have historically had lower yields, however they are less volatile and provide a steady income. Growth funds seek out stocks that don’t pay a regular dividend however they have the potential to grow in value and generate more than average financial gains. Index funds are based on a specific stock market index like the Standard and Poor’s 500, sector funds are focused on certain industries.

If you decide to invest with an online broker, robo-advisor or another type of service, you need to be knowledgeable about the kinds of investments you can choose from and the conditions they apply to. Cost is a key aspect, as fees and charges will reduce your investment return. The best online brokers, robo-advisors, and educational tools will be transparent about their minimums and personal finance forum fees.