Financial Basics

Getting Organized

Take Control

Build Your Credit

Banking Basics

Taking the Next Steps

Determine Financial Goals

Creating a Budget

Building Your Career

Borrowing Basics

Investing for Your Future

Investing 101

Saving Strategies

Choose the Right Investment

Investing Online


Increase Your Earning Power

Tuning Your Career

Negotiating for Success

Changing Careers

Going Back to School

Starting Your Own Business

Smart Borrowing

Take Control of Your Debt

Paying for Major Purchases

Getting a Loan

Finance an Education

Managing Your Finances

What's Your Net Worth

Managing Daily Finances

Tax-Planning Strategies


Plan for Financial Success

Creating a Financial Plan

Achieving Short-Term Goals

Plan for Long-Term Goals

Retirement Planning Basics

Investing Wisely

Investing Considerations

What's Right for You?

Investing Techniques

Preserving Your Wealth

Reallocating Your Assets

Insurance Options

Wills and Trusts

Plan for Heirs

Gifting to Family & Charity

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Investing 101

Achieving your financial goals takes planning and discipline, but most goals won't become realities unless you start investing your money. Looking at the historical performance of the markets shows you that just keeping your money in savings won't even beat in inflation.

A fundamental understanding of the three basic asset classes-stocks, bonds and cash equivalents-will help you make more informative investment decisions.

Stocks are also referred to as equities, as a share of stock represents equity in a company. Historically, equities have outperformed all other asset classes but past performance does not guarantee future results. Stocks offer the best growth opportunity over the long-term as well as the highest risk because their value may fluctuate significantly. Be sure to assess your risk tolerance before investing in the stock market.

Different types of stocks include:

  • Growth and income: Stocks that strive for steady appreciation as well as pay their investors quarterly dividends.
  • Large capitalization: Stocks with a very large market capitalization (number of shares outstanding times the price of the shares), typically at least $5 billion.
  • Mid capitalization: Stocks that typically have a $1-$5 million market capitalization.
  • Small capitalization: Stocks that usually have a market capitalization of $500 million or less.
  • Preferred: A class of stock that pays dividends at a specified rate.

Bonds, or fixed-income securities, are considered debt investments because they represent a loan made to a government or corporation for a fixed rate of interest over a specific amount of time. A bond's term may range from several months to 30 years or more and the longer the term, the higher the rate of interest. Bonds are graded based on the credit worthiness of the corporation or government issuing them.

Different types of bonds include:

  • Government: Secured by the full faith and credit of the U.S. Government and considered quite safe.
  • Corporate: Issued by publicly traded companies.
  • Municipal: Issued by states and local governments, the income earned is exempt from federal taxes and in some states, exempt from state taxes.
  • High-yield: Also referred to as "junk bonds" as they are speculative, high-risk, high-interest rate corporate or municipal bonds.

Cash equivalents
Cash equivalents are safe, short-term, very liquid investments that are, as the name suggests, equivalents to cash.

Cash equivalents include:

  • Money market funds: Technically a mutual fund, money market funds maintain a share price of $1 with an interest rate that fluctuates.
  • Certificates of deposit (CDs): Also referred to as time accounts, CDs provide a "locked" amount of interest for a specific amount of time.



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