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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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