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Investments: What Can They Do For You?

Understanding the different investment types, and what each can do, is the first step toward building a diversified portfolio.

Before we deal with the asset classes typically offered in retirement savings plans, let's take a look at three primary investment categories: stable value and money market investments, bonds and stocks. All investments are designed to do one or more of the following:

  1. Protect your savings from loss
  2. Provide regular interest payments or dividend income
  3. Provide growth by increasing in value

Few investments can do all three. We will show you how to balance competing investment goals as you choose your investments later on in this guide..

What About Risk and Return?

Understanding the return possibilities, along with the potential risk associated with each asset class, is also helpful. The relationship is simple: Over long periods of time, increased risk to your investments has generally offered the opportunity for higher returns over time. Keep the risk and return chart above in mind as you move on to learn more about the different asset classes.

Asset Allocation  Different Asset Classes