| One of the most exciting things about investing is | | | | investment or you can hang on to it and hope |
| the sheer number of options you have to invest | | | | that the value climbs higher so you can sell it at a |
| in. If you are new to investing, it can be a bit | | | | later date and make even more money. Most |
| overwhelming at first, but once you understand all | | | | stocks can be divided up into two major |
| of the doors that are open to you, it can lead to | | | | categories: high risk and low risk. It is important to |
| a "kid in a candy store" type of feeling. Probably | | | | note, however, that all stocks have risks, even |
| the two most traditional investments that most | | | | "blue chip" stocks that are usually the safest to |
| people have heard of are stocks and bonds. If | | | | own. Over the years, some types of stocks have |
| you were to check the average portfolio of an | | | | proven to carry a higher risk than others, such as |
| average investor, you would likely find half a | | | | airline stocks or technology company stocks, while |
| dozen stock investments, some mutual funds and | | | | energy stocks tend to be fairly stable. A "blue |
| some bonds. The great thing about stocks and | | | | chip" stock is stock in a company that has been |
| bonds is that they work together to help balance | | | | around for a very long time and is constantly |
| out the amount of risk in a portfolio: stocks tend | | | | turning a profit, such as Shell Oil or Microsoft. You |
| to be higher risk while bonds tend to be lower | | | | could still theoretically lose money on a blue chip |
| risk. The first thing that every new investor | | | | stock investment, but there is much less chance |
| should learn is that your portfolio should have a | | | | of Shell going out of business tomorrow |
| balanced amount of risk to be considered healthy. | | | | compared to a new start up company that has |
| Let's take a look at why having both stocks and | | | | recently gone public. |
| bonds together makes so much sense. | | | | Bonds are a much lower risk type of investment |
| To the untrained listener, when you talk about | | | | that many people use as their very first |
| investing, you are talking about stocks. Not only | | | | investment. Perhaps you once owned municipal |
| are stocks the main from of investment for | | | | bonds or even war bonds. These types of bonds |
| millions of people, they are also the main | | | | work the same way that commercial bonds do. A |
| ingredient in mutual funds and in many other | | | | company needs to raise money so they sell |
| forms of investing. To put it simply, when you | | | | bonds. You can buy these bonds and then, on a |
| own a share of a stock, you own a piece of a | | | | certain date in the future, you can cash them in |
| company; a company that you believe is going to | | | | and make a small profit. Even big time investors |
| grow, prosper and earn even higher profits then | | | | with huge portfolios invest in bonds because they |
| they earn now. It is a vote of confidence in that | | | | are relatively safe compared to stocks, although |
| company. When you buy a share of a company, | | | | there is always a risk when you invest. Some |
| that company receives that cash and uses it to | | | | companies offer both stocks and bonds at the |
| invest in the future. If things get better, your | | | | same time as a way to earn money for future |
| stock becomes more valuable and then you can | | | | investing. |
| choose to either sell it and turn a profit on your | | | | |