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What to Invest In

(Stocks and Stuff)

Your perfect investment mix depends on your age, how quickly you want to grow your money and how much risk you’re willing to take. There is a whole world of investment possibilities out there, but for the beginner, it’s best to start with good old stocks, bonds and mutual funds.


Buying stock is investing in the future performance of a company. Stocks are risky because there are many factors that can make share prices rise and fall, including things outside the company’s control.

When you invest in bonds, you are loaning money to a corporation or government and earning money on the interest. This makes bonds more predictable because you’re collecting on a deal that’s already been agreed to. However, there’s always the risk of bond prices declining due to rising interest rates or the bond issuer failing to make payments on time.

In the beginning, you’ll probably invest in mutual funds or exchange traded funds (ETFs), which pool your money with other investors in a variety of stocks, bonds and commodities.


All mutual funds charge management fees — around 1% of the fund’s assets, but sometimes much more. Some funds also charge “load” fees, which are up-front commissions paid to the people who sell you the fund.

The cost of operating a fund, reflected as a percentage, is called its expense ratio. The lower the expense ratio, the better. Research has shown that low-cost funds that aim for steady growth over time deliver the biggest returns to investors.

Every mutual fund has its own philosophy. Read the fund’s prospectus to understand how it aims to make money, diversify and adjust for risk over time. Look for information on the fund’s benchmark, which is how you know if your fund manager is doing a good job keeping pace with its goals.


In general, a fund’s total returns are expressed by its net asset value (NAV) over periods of 1, 3, 5, 10 or 15 years, or since the fund's inception. The NAV is a daily calculation of the fund’s market value, minus its operating costs, divided by the current number of issued shares.

(You can find these ratings online by searching for the fund name or its symbol. For example, the symbol for the Vanguard Capital Opportunity Fund is VHCOX.)

Historical performance is no guarantee of future returns, but it’s a starting point when you are researching an investment.

Look for low-cost funds that have been around at least 3-5 years. The 10-year markers show long-term performance, but the year-to-year fluctuations show how consistent — or not — the returns have been.


Common benchmarks include the Standard & Poor’s 500 (S&P 500), which includes stocks from 500 large U.S. companies, and the Dow Jones Industrial Average, which is the average of 30 major stocks, such as Microsoft, Apple, Wal-Mart, General Electric and the Walt Disney Company.

The Dow and the S&P 500 can show how well the overall stock market is doing, but you can’t invest in an index — it’s a marker, more like a pace car, rather than a destination. However, you can invest in funds that mimic the index.

Carefree young woman thinking about what to invest her money in.


An index fund is passively managed, which means it holds the same securities in the same proportions as the index it tries to copy.

Index funds tend to be much less expensive because there are fewer transactions and therefore, lower fees. Index funds come in many varieties. Don’t automatically assume an index fund will be cheaper. Look for the lowest expense ratios when shopping around.


You don’t have to have a finance degree to choose investments these days. Most big brokerages offer target date funds, which automatically adjust the riskiness of investments as you near retirement age.

Many robo-advisors and apps offer investment packages tailored to your goals, risk tolerance and values — and don’t be afraid to ask your human resources department for help understanding your workplace plan.

As always, we’ve got your back. — The On Your Own Team End of article insignia

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by On Your Own, the National Endowment for Financial Education or any of its affiliate programs.]