Stocks

• Stocks invest money in individual companies, with the shareholder becoming a minority owner of the company. Odd-lot investors never seem to be able to keep up with Wall Street traders and fund managers. The reason is power in numbers, meaning the amount of dollars invested. That isn't to say the little guy can't make money with stocks.
  Don't put all your eggs in one basket: Diversify your portfolio. It is important to have several stocks and preferably in a variety of industries.
  Look at earnings and examine how they were derived. A company that meets earnings expectations through downsizing is not as strong as a company that was slightly off expectations, but invested heavily in company growth.
  If you are looking to buy and hold stocks and don't want to monitor every little market turn, have a broker monitor your account and call you with problems. If you are looking to trade regularly, be prepared to do daily due diligence to arm yourself with pertinent information. Stocks are considered a higher risk than bonds.
  
  

Bonds

• Bonds are an investment in which you loan money to a company or government entity such as the Treasury or Municipalities. These are considered less risky overall compared with stocks because in the event of bankruptcy, a stockholder (company owner) is paid after all debts are paid. Bonds are a debt investment.
  That being said, look for bonds with as high a rating as possible if you are seeking a modest return over a specific period of time. Bonds come in a variety of time frames, from three months to 10 years.
  Moody's and Standard & Poor's are two popular bond rating companies. The highest rating is AAA, but anything BB or higher is considered investment grade. If you are looking for higher returns, you can go with bonds rated below BB, often called junk bonds. A bond rated D or below is in default and not paying dividends.
  
  

Mutual Funds

• Mutual funds are great investment options because they give a person immediate diversification. When you purchase shares in a mutual fund, you are pooling your money with other investors whose investment objectives resemble yours.
  When purchasing mutual funds, look at the major holdings in the fund. These should be companies that are in tune with your investment strategy. For example, if you are seeking growth and income, you want a fund that is holding major U.S. companies. If your desire is for growth, you may want a technology fund that is weighted in computer, component and software manufacturers.
  Compare funds from different fund families to see which fund offers the same investment strategy with lower fees. Don't sell one fund to chase another fund that is doing well. You may pay more in fees than you gain in a one-time percentage jump.