Different types of investments

If you are new to the investing world, you probably know a little bit about the stock market and how people make money. If you are completely clueless about the investing world, here is some basic information about the different types of investments you can participate in:

Stocks
High-risk investors like to purchase individual stocks and sell them often. This is a great investment strategy and it has been known to work for a lot of people. If you don't know much about stocks, you probably should opt for a mutual fund. When you purchase stocks, you essential own a small portion of the company. If this company performs well, you will receive dividends or you can sell your stock for a profit. If the company does poorly, you will lose all your money or some of the money you invested and you may need to sell it for a loss. The stock market is tricky to learn and it takes time to master it. If you are new to stocks, you may want to consider hiring a broker to help you out until you get the hang of it.

Bonds
Bonds are considered a low-risk investment strategy. They are much safer than stocks and you will get some money back, it may not be much, but it is better than nothing. A bond is simply a certificate of debt with a promise to pay a certain amount on a specific date. The amount that is paid back to you will have interest so you will earn back all the money you invested plus more. The nice part about bonds is that the company has to pay them even if they declare bankruptcy. A lot of people purchase government bonds to add to their portfolio, this protects them from losing all their money if some of their high-risk investments go sour.

Mutual Funds
A popular investment strategy is to use mutual funds. Mutual funds are beneficial for people that don't have a lot of money to invest in the stock market, but would still like to invest their money somewhere to gain a return. You will pool your money with other investors that are in your same situation and a mutual fund manager will take this money and invest it in stocks and bonds. A mutual fund is a great investment strategy because it allows you to diversify, which is a great way to reduce your risk.

Money Market
A money market is a safe way to earn some money and have access to it whenever you need it. A money market account will earn a higher interest rate from a savings account. The nice part about money market accounts if you can have instant access to this money, you do not need to wait to be a certain age or hold the account for a set number of years before you can use the money. The money market accounts will help you during times when you need some extra money to pay for a down payment on a new home or an expensive medical bill. A money market account really acts like a checking or savings account, there is just a limit on how many withdraws or transfers you can make.

Annuities
If you want another safe investment strategy, you should consider annuities. Annuities are relatively safe investments. They are contracts sold by insurance companies to provide payments to the contract holder at specific intervals. Normally the payments will start when you reach your retirement age. The earnings from the annuities will be taxed when you withdraw them. You won't make a ton of money with annuities but it is a guaranteed income when you retire.