Diversify Your Investments
When it comes to investing it is important to not put all your eggs into one basket. You can suffer significant losses if one investment fails. A better strategy is to diversify your portfolio across different the different types of assets, including stocks (representing shares in the individual companies), bonds, and cash. This can reduce the fluctuations in your investment returns and let you enjoy a greater growth rate over the long run.
There are several kinds of funds, such as mutual funds exchange-traded funds, unit trusts (also called open-ended investment companies or OEICs). They pool money from numerous investors to purchase stocks, bonds or other assets and take a share of the profits or losses.
Each kind of fund has its own distinctive characteristics and risks. Money market funds, for example are invested in short-term security issued by federal state, local, and federal government or U.S. corporations, and are typically low risk. Bond funds typically have lower yields, however they are less volatile and provide a steady income. Growth funds are a way to find stocks that don’t pay a regular dividend but are able to increase in value and produce more than average financial gains. Index funds follow a specific index of stocks such as the Standard and Poor’s 500. Sector funds are geared towards one particular industry.
If you decide to invest via an online broker, robo-advisor or another type of service, you need to know the kinds of investments you can choose from and the terms. Cost is a key aspect, as charges and fees can affect the investment’s return. The best brokers online and robo-advisors provide transparency about their fees and minimums, as well as providing educational tools to help you make educated choices.
