| Asset class | Definition |
|---|---|
| Stocks | A share of stock is a portion of ownership in a company, allowing you to participate in a company's growth. |
| Bonds | Bonds allow you to lend money to a company, government, or government agency, and in return, you receive a promise of repayment, plus interest, at specific dates. Bonds are particularly useful for retirees as they can provide a predictable income stream. |
| Cash | CDs, Treasury bills and money market funds are all examples of cash investments. Cash is great for stability and liquidity, but it's not the best choice for building long-term wealth. |
| Mutual Funds | A mutual fund pools money from many investors and invests in a broad range of stocks or securities. With mutual funds you can achieve a certain level of diversification without having to choose each individual security. There are two different approaches to consider with mutual funds—passive and active. Passively managed funds (known as index funds) are designed to track—rather than beat—a specific index such as the S&P 500®. Index funds usually have lower fees and expenses, which can add up over time. Actively managed funds strive to beat the market. Active management could result in better performance than an index, but it's no guarantee. And the higher costs and taxes generated by these types of funds may result in worse performance in the end. |
| ETFs | With an ETF, you own a single security representing a basket of underlying stocks that track an index, such as the S&P 500®. The main difference between mutual funds and ETFs is the way they're traded: mutual funds are processed at the end of the day; ETFs trade like stocks, which means you can buy or sell them any time during the trading day. |