Diversify Your Investments

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It’s important to not put all your eggs in one basket when it comes to investing. You could suffer huge losses in the event that one investment fails. It is better to diversify across asset classes, such as stocks (representing shares of companies) bonds, stocks and cash. This will reduce the fluctuations in your investment returns and let you gain more long-term growth.

There are several kinds of funds, such as mutual funds, exchange-traded funds and unit trusts (also known as open-ended investment companies or OEICs). They pool money from numerous investors to purchase bonds, stocks and other assets and take a share of the gains or losses.

Each type of fund is unique, and each comes with its own risk. For instance, a money market fund invests in short-term investment that are issued by federal, state and local governments as well as U.S. corporations and typically is low-risk. Bond funds tend to have lower yields but have historically been more stable than stocks, and offer a steady income. Growth funds search for stocks that do not pay a dividend, but have the potential of growing in value and producing above-average financial gains. Index funds track a specific index of stocks, such as the Standard and Poor’s 500, while sector funds specialize in a specific industry segment.

It is essential to know the types of investments available and their terms, regardless of whether you choose to invest via an online broker, roboadvisor or any other type of service. Cost is an important aspect, as charges and fees can affect the investment’s return. The top online brokers, robo-advisors and educational tools will be transparent about their minimums and charges.