You have lots of investment choices.

The four you’re likely to encounter most often as you start to invest are:

Stocks, bonds and/or cash-equivalents. They can provide diversification for investors. Mutual Funds are a type of investment that lets small investors buy into a portfolio , or collection of holdings. Owning mutual shares gives you the ability to benefit from the earnings the fund’s investments may provide. A fund could own just stocks, just bonds, just cash or a combination of those investments.

Stocks. When you buy shares of stock, you are a part owner of a company. That means you have equity . You can profit if the company makes a profit and pays dividends or if the share price goes up, and you can sell for more than you paid to buy. Sometimes both things happen. But you can also lose money if the price goes down.

Bonds. When you buy a bond, you’re loaning money to the corporation , government, municipality or federal agency that issued it for a specific period of time. The issuer promises to repay your principal plus interest for the use of your money.  There are various risks associated with the purchase of bonds.  Some risks include:  market risk, selection risk, timing risk, risk that you will be unable to repay your debts, and therefore be “in default.”', default risk and inflation risk which may cause you to lose value in your investment.

Cash. You can buy a certificate of deposit (CD), put money in a money market account or buy U.S. Treasury bills, which are a type of government bond. The advantage of cash investments is you get back the amount you invested plus interest in most cases.

Why might you choose mutual funds?

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