Most investments fall into one of three basic asset classes — cash equivalents, bonds and stocks (also called shares or equities).

 

Cash equivalent (e.g. fixed deposit) investments are usually investments which have low risk of losing value but offer relatively low potential returns. Cash equivalents are typically used to hold money that will be needed in the near future or to hold assets temporarily while considering how to invest the assets for the long term.

 

Bonds, often referred to as fixed income securities or debt securities, are loans to a corporation or government to finance its operations. A bond represents the corporation's or government's promise to repay at a specified date (at maturity) the amount borrowed from investors. The bond generally earns interest. Bonds also increase or decrease in value based on market conditions.

 

Examples of bonds include government bonds and corporate bonds.

 

Stocks represent ownership in a corporation. If you own stock in the XYZ Corporation, you are part owner of that company. Stocks may provide income in the form of dividends. Stock investments increase in value when the price of the share goes up and vice versa. Historically, over periods of several years or more, many types of stocks have increased in value. However, past performance is no guarantee of future results.