It’s important not to put all your eggs into one basket when it involves investing. Doing so exposes you to the potential for significant losses if a single investment does poorly. Diversifying across different asset classes, such as stocks (representing the individual shares of companies) bonds, stocks, or cash is a better option. This can help reduce the fluctuations in your investment returns and allow you to benefit from a higher rate of growth over the long term.

There are many types of funds. These include mutual funds exchange traded funds, as well as unit trusts. They pool funds from a variety of investors to purchase stocks, bonds or other assets and take a share of the gains or losses.

Each kind of fund has its own characteristics and risks. Money market funds, for instance are a type of investment that invests in short-term securities issued by federal or state governments, or U.S. corporations, and are typically low risk. Bond funds typically have lower yields, however they are less volatile and can provide steady income. Growth funds are a way to find stocks that do not pay a regular dividend but are able to grow in value and yield higher than average financial gains. Index funds are based on a specific stock market index like the Standard and Poor’s 500, while sector funds specialize in particular industries.

If you decide to invest with an online broker, robo-advisor or other service, it’s essential to be familiar with the various types of investments that are available and the conditions they apply to. A key factor is cost, as charges and fees can eat off your investment’s return over time. The best brokers online and robo-advisors provide transparency about their charges and minimums, and provide educational tools to help you make informed decisions.

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