22 There are college courses and books written on investing, but here we are just going to go over the basics of the most popular types of investments: bonds, stocks, mutual funds, and 401k plans. If you want to invest your money, learn as much as you can about your investment options and get started. Bonds The federal government, cities, and companies sell bonds as a way to raise money. When you purchase a bond you are loaning your money to the bond issuer for a specific period of time. At the end of the term (when the bond "matures"), you get your money back, with interest. The safer the bond, the lower the interest rate; the riskier the bond, the more interest your money will earn. For example, a Treasury bond is issued by the US government. It's a very safe investment, but it has a lower interest rate than most other bonds. Stocks When you purchase stock in a company such as Coca-Cola, Apple, or Ford, you are purchasing shares in that company, and you become part owner. If the company has a good year, you may receive a portion of the profits (a dividend). If the company does well over time, the value of your stock will increase, and you'll make a profit when you sell the stock. Of course, if a company doesn't do well, their stock becomes less valuable and you could lose some, or even all, of your investment. Mutual Funds Rather than purchasing individual stocks or bonds, many people purchase mutual funds. This makes investing simpler, and less risky. When you invest in a mutual fund, you are adding your money to a pool that's made up of many people's money. This pool of money is managed by financial professionals, and is used to buy shares of stock in many dif- ferent companies. Since mutual funds are made up of many stocks (and perhaps bonds), pur- chasing a mutual fund is an easy way to diversify your investments—and not "have all of your eggs in one basket." For the first time investor, investing in a mutual fund is a smart thing to do.