Investing

ABOUT INVESTING

• Investing is the act of allocating resources, usually capital, with the expectation of generating an income, profit, or gains.

• In investing, risk and return are two sides of the same coin; low risk generally means low expected returns, while higher returns are usually accompanied by higher risk.

• Today, investment is mostly associated with financial instruments that allow individuals or businesses to raise and deploy capital to firms. 

INVESTING RISKS

• Investing has risks. Investment return and risk commonly have a positive correlation. 

• Investors can reduce portfolio risk with a broad range of investments. 

• Diversification spreads assets across different types of investments, so you're not putting all your eggs in one basket.

• By holding different products or securities, an investor may not lose as much money as they are not fully exposed in any one way.

COMMON TYPES OF INVESTMENTS

• Stocks. 

A buyer of a company's stock becomes a fractional owner of that company. Owners of a company's stock are known as its shareholders. 

• Bonds. 

A bond represents a loan you make to the government, municipality, or corporation. Bonds are debt obligations of entities, such as governments, municipalities, and corporations.

• ETFs. 

An exchange-traded fund (ETF) is an investment fund that generally holds a portfolio of one specific asset class like stocks, bonds, or commodities.

• Mutual Funds. 

A mutual fund pools money from many investors and then invests that pool in a broad range of investments, such as stocks, bonds, and other securities, to create a portfolio.