https://highmark-funds.com/2021/12/23/market-risk-management-and-risk-calculations/
It’s crucial not to put all your eggs in one basket when it is time to invest. You could be liable to significant losses when one investment does not work. A better option is to diversify your portfolio across different the different types of assets, including stocks (representing shares in individual companies), bonds and cash. This can reduce the fluctuation of your investment returns and let you enjoy higher long-term growth.
There are many kinds of funds, such as mutual funds exchange-traded funds, unit trusts (also known as open-ended investment companies or OEICs). They pool funds from many investors to purchase stocks, bonds or other assets and share in the gains or losses.
Each fund type has its own characteristics and has its own risk. Money market funds, for example, invest in short-term securities issued by federal local, state, and federal government or U.S. corporations They are generally low risk. These funds usually have lower yields, but have historically been more stable than stocks, and offer a steady income. Growth funds look for stocks that don’t pay dividends but are capable of growing in value and producing above-average financial returns. Index funds follow a specific index of the stock market like the Standard and Poor’s 500. Sector funds are geared towards one particular industry.
If you decide to invest with an online broker, robo-advisor or another type of service, you need to be aware of the different types of investments available and the terms they come with. A major factor to consider is the cost, as charges and fees can eat into your investment returns over time. The top online brokers and robo-advisors are open about their fees and minimums. They also provide educational tools to help you make informed choices.
