Investing your hard-earned savings into a single stock or bond carries significant risk, especially for the novice investor. You have probably heard the term “diversification” thrown around, or the old saying, “don’t put all of your eggs in one basket,” but how does a beginning investor with a small amount of savings invest in a diversified portfolio containing a variety of stocks and/or bonds?
The term “investment vehicle” refers to a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. The most popular example of an investment vehicle is called a mutual fund. In regular speak, you invest in one mutual fund and that mutual fund invests in lots of different stocks, bonds, or money market investments. This allows investors to obtain a well-diversified portfolio, containing assets selected by professional investors, without having to invest large sums of money or research stocks on their own.
Investing in mutual funds involves risk, including possible loss of principal. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. This post was contributed by Brittney Castro, CFP® professional and creator of www.FinanciallyWiseWomen.com. Brittney Castro is not affiliated with Theeverygirl.com. Brittney A. Castro is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC. California Insurance License #0F33895