Investments, like savings, require discipline to spend less than you earn and set it aside for a later time. The time horizon for growth investments is typically longer than savings. The hope is a greater return than on typical savings instruments and correspondingly, the risk of losing money is greater.
- Stocks are ownership of business. Stockholders share in the growth and losses of the business
- Bonds are a loan to a business or a government. They are dependent on that business or government being able to pay their debts. The value of a bond can fluctuate inversely with the changes in current interest rates. Some bonds have preferential tax status. Bond holders are entitled to an agreed interest rate and are paid before stockholders.
- Mutual Funds are a collection of stock and/or bonds held by a management company for the benefit of mutual fund shareholders. Each fund is managed to a set of objectives stated in the funds offering prospectus.
- Variable Insurance Products merge the benefits of life insurance and/or annuities with the benefts and risks of investments.
- Other investments such as Real Estate Investment Trusts (REITs), Unit Investment Trusts (UITs), Limited Liability Companies (LLCs), Exchange Traded Funds (EFTs) and the like are specialized adaptations which require careful consideration for suitibility. Like stocks, bonds and mutual funds all investment may lose value.