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| Basics | Funds | Allocation | Retirement | Investing | Terms | FAQ | |
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Before you can pick an investment, you need to have a thorough understanding of what you’re investing for – because different types of investments are suited to achieving different goals.  For
example, if you’re investing to prepare for sending a child to college
in 15 years, you’ll need an investment vehicle that can grow, or appreciate,
in value. If you’re investing to help supplement your monthly income,
then you’ll need an investment vehicle that seeks income.In general, stocks are seen as a growth investment (although some stocks do provide income), while bonds are seen as income-producing investments. Another important factor in choosing investments is your time horizon, which is simply how far into the future your goals are. This can help you determine how much risk you can or should be taking on, and you can pick your investments accordingly. Typically, shorter-term goals require more conservative investments, to reduce the risk of principal loss. Conversely, the more time you have until you need your investment dollars, the more risk you can afford to take on if you’re comfortable doing so. A mutual fund’s investment objective can be found in its prospectus, where you’ll often see it stated in terms of both objective and time horizon. Some common investment objectives are as follows:
It’s important to remember that these are objectives, meaning that’s what the investment strives to accomplish. There is no guarantee that any investment will achieve its objective.
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