- Mutual funds combine money from thousands of investors to build a portfolio of assets including bonds, real estate or other securities. Some mutual funds allow you to invest as little as a few hundred dollars to get started. If you are looking for a safer, more conservative investment alternative to stocks, a bond mutual fund or government bond fund may be a good idea. If you want a higher-risk fund, try investing in high-yield bond funds, or "junk bond" funds. To assess the risk level of a mutual fund, check for several things: First look at the fund's largest loss in a quarter, which helps you understand the worst-case scenario; then look at the "beta," which is a measurement of the volatility of a fund versus the Standard & Poor's 500 index; finally, check the standard deviation, which shows the volatility of average returns.
- Companies and governments issue bonds to pay for expenses and finance projects. When you buy a bond, you essentially loan your money in exchange for interest payments down the road. While bonds are certainly a less volatile investment option than stocks, they are by no means risk-free. When interest rates go down, bond prices go up, and when interest rates go up, bond prices go down. There are many types of bonds to choose from, including treasury bills, or "T-bills"; zero-coupon bonds; mortgage-backed securities; corporate bonds; and municipal bonds.
- Exchange-traded fund assets were over $1 trillion in 2010. ETFs can be an attractive investment option for people who want to invest their money in something other than stocks because they offer low fees, transparency, tax savings and stock-like characteristics, according to MSN Money. ETFs are similar to mutual funds, with a few key differences. ETFs are generally cheaper than mutual funds; they trade on exchanges like stocks, so you can buy and sell shares at any given point during the day; they release a list of their holdings every day, while mutual funds only report holdings every month; and they're more tax-efficient than mutual funds.
- CNN Money says a blended investment strategy is a smart move in any economy. Although the stock market is a risky short-term investment, from 1926 to 2010, it returned an average of almost 10 percent each year. U.S. Treasury bonds returned an average of 5.4 percent over the same period. Determine your risk profile and investment length, and then choose several investment types to help grow your portfolio.
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