When it comes to investing, it’s important not to put all your eggs into one basket. You could suffer huge losses if one investment does not work. Diversifying across different asset classes like stocks (representing the individual shares of companies) bonds, stocks, or cash is a better choice. This will help decrease the fluctuations in your investment returns and allow you to enjoy a greater growth rate over the long run.

There are many types of funds. They include mutual funds, exchange traded funds and unit trusts. They pool funds from a variety of investors to purchase stocks, bonds or other assets and share in the gains or losses.

Each type of fund has its own unique characteristics and risk factors. For example, a money market fund invests in short-term investments issued by federal, state and local governments, or U.S. corporations, and generally has low risk. Bond funds have historically had lower yields, but are less volatile and provide steady income. Growth funds are a way to find stocks that don’t pay regular dividends however they have the potential to increase in value and produce use this link above-average financial returns. Index funds are based on a specific index of the stock market like the Standard and Poor’s 500. Sector funds are focused on specific industries.

It is important to know the types of investments available and their terms, whether you choose to invest via an online broker, roboadvisor, or another company. A major factor to consider is the cost, since charges and fees can cut into your investment’s returns over time. The top brokers on the internet and robo-advisors will be transparent about their fees and minimums, as well as providing educational tools to help you make informed decisions.