STOCKS
Stocks are equity investments, or ownership
shares in a business. When you and other
investors buy shares, you actually buy part
of the business.
If it prospers, you have the potential to make
money either because you're paid a share of
the profits or because the value of the stock
increases, or both. You can own stocks for as
long as you like, or buy and sell them regularly,
depending on your investment plan. While you
can't predict the future, stocks have historically
been stronger performers than other
types of investments.
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CASH
Cash is money you hold in readily
accessible savings, checking, and
money market accounts. When those
accounts are insured, as bank accounts
are, you can be confident of being able
to withdraw the amount you deposit.
You may also earn interest on the
account value.
Keeping a portion of your
investment principal in cash
lets you take advantage of new
investment opportunities as
they arise. The risk with cash
is that its purchasing power
tends to be eroded by inflation over the long term.
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BONDS
Bonds are loans you make to corporations, governments, or agencies. They
promise to pay back the full amount of the loan at a specific time plus
interest, or a percentage of the loan amount, for the use of your money.
Investors buy bonds, also known as debt securities or
fixed-income investments, because they believe that
they will get their investment amount back, and because they like the idea of
regular interest income.
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