When it is time to invest, it’s important not to put all your eggs in the same basket. You could suffer huge losses when one investment does not work. Diversifying across asset classes such as stocks (representing individual shares in companies), bonds, or cash is a better choice. This reduces investment returns fluctuations and allows you to reap the benefits of higher long-term growth.
There are many types of funds. These include mutual funds exchange traded funds, as well as unit trusts. They pool funds from many investors to purchase bonds, stocks or other assets and take a share of the gains or losses.
Each kind of fund has its own unique characteristics and risk factors. For instance, a cash market fund invests in investments for short-term duration issued by federal, state and local governments as well as U.S. corporations and typically is low-risk. Bond funds have historically had lower yields, but are more stable and offer a steady income. Growth funds search for stocks that do not pay a regular dividend but could increase in value and produce above-average financial gains. Index funds adhere to a specific index of the market, such as the Standard and Poor’s 500. Sector funds are geared towards specific industries.
It is important to know the different types of investment options and their terms, regardless of whether or not you decide to invest with an online broker, roboadvisor, or any other service. Cost is a key element, as charges and fees will take away from your investment returns. The top online brokers, robo-advisors and educational tools will inform you about their minimums and fees.
