Check out this basics language guide to investing

Check out this basics language guide to investing

If you want to start investing this article is a must-read. Here you will find a basics language guide to investing. Keep reading to discover all the details!

If you want to start investing this article is a must-read. Here you will find a basics language guide to investing. Keep reading to discover all the details!

Like many pursuits, investing has its own language, with terms and concepts that may at first be unfamiliar to you. But it doesn’t have to be intimidating. Understanding some of the core ideas can help give you the confidence to get started.

First, think about the goals you’re trying to achieve. Investing is a means to an end, and your objectives could range from paying for our children’s college or funding your retirement to simply building a nest egg.

First, think about the goals you’re trying to achieve.

Once you have a clear sense of your goals, the time you have to potentially reach them and the level of risk you’re willing to tolerate along the way, you can plan a mix of investments to help you get there.

As you build an investment portfolio, you need to know the different categories, including stocks, bonds, cash equivalents and funds that combine them. Each has unique characteristics and risks.

Stocks are shares of ownership in a company that give you a direct stake in its success or failure. Stocks tend to offer the highest potential for return but may also carry higher risk than other investments.

Bonds are loans to a company or government that promises to pay you back, usually with interest, over a period of time. Bonds generally offer modest potential for return but with moderate risk. However, certain high-yield bonds pose higher risk.


Cash equivalents are often money market mutual funds that invest in short-term bonds. These bonds are usually paid back within a year and are readily convertible to cash. Their potential return is typically low, as is their risk.

Mutual funds combine diverse investments, which may include stocks, bonds and other assets. Financial professionals choose the investments and manage the funds, so they may have higher fees than similar exchange-traded funds (ETFs). Mutual funds offer convenience as well as diversification. 

Index funds are a kind of mutual fund that includes investments chosen to reflect the performance of indexes such as the Standard & Poor’s 500.


 

Index funds are a kind of mutual fund that includes investments chosen to reflect the performance of indexes

Target-date funds, also called lifecycle funds, may adjust their mix of investments, gradually reducing the level of risk as you get closer to the end of your time horizon. The target date is the approximate date when the investor plans to start withdrawing assets from the fund. The principal value of these funds is not guaranteed at any time, including the target date.

Exchange-traded funds (ETFs) are similar to mutual funds but with important differences. For example, ETFs can be bought and sold like stocks while markets are open and may have lower costs than mutual funds. Mutual funds trade only once a day after markets close.

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