Today’s Tips focus on investing, something we all should be working towards.

– Stock is effectively a tiny piece of ownership in a company.  You can own tiny pieces of Apple, Google, Home Depot, Kroger, or any number of companies.  Those companies are traded on the stock exchanges.  The value of a stock goes up or down depending on a number of factors, but it primarily reflects the value of the business.  Historically, stocks have returned an average of around 11% annually.

– Bonds are debt instruments, where you lend money to a company or government entity, and they pay it back with set interest.  They are considered less volatile than stock investing, meaning they go up and down with less intensity.  Historically, bonds have returned an average of around 6% annually.

– Mutual Funds are pools of money that are managed and invested in a combination of stocks and/or bonds.  When you buy into a mutual fund, you are buying a tiny fraction of all the companies owned by that mutual fund.  If you were to buy ten shares in a mutual fund, you would own tiny fractions of everything that fund invested in, which may be as much as dozens of different companies.  Mutual funds are a great way to easily spread your money around (diversify).

For more on mutual fund investing, check out this post.