What you need to know about major investment types
Learning about different investment types at a high level can help you better understand what you own.
Different investment types can have different risk and return characteristics and may be suitable for different investors.
Bonds represent the debt of its issuer (typically corporate or governmental), and generally offer investors lower risk and lower returns potential relative to stocks.
Funds—mutual funds, exchange-traded funds (ETFs), closed-end funds and other pooled investment vehicles—offer ways for investors to buy a basket of many individual holdings. They can invest in many different asset classes—such as stocks, bonds, commodities, currencies, real estate, etc.—or hold a balance of multiple asset classes.
Stocks represent ownership in a corporation and a claim on part of its assets and future earnings. They generally offer higher potential returns but are also considered riskier partially because their claims on assets come after those of bondholders.
The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Principal value and return of an investment will fluctuate with changes in market conditions.
Investors should carefully consider the investment objectives and risks as well as charges and expenses of mutual funds and exchange traded funds (ETFs) before investing. To obtain a prospectus, contact your Financial Advisor or visit the fund company’s website. The prospectus contains this and other important information about the mutual funds and ETFs. Read the prospectus carefully before investing.
Two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments.
Furthermore, high yield bonds are considered to be speculative with respect to the payment of interest and the return of principal and involve greater risks that higher grade issues.
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