What are the benefits of each of the three basic asset classes?
• Stock / Equity investments include stocks and stock mutual funds. These investments present the most risk to your principal but offer the greatest potential for higher returns. • Bond / Fixed Income investments include bonds and bond funds. They present less risk to your principal than stocks but generally offer lower returns. • Cash investments include certificates of deposit, Treasury bills, money market funds, and similar investments. They typically earn lower returns than stock or bond investments but present very little risk to your principal. Because the different asset types usually don’t move up and down at the same time or at the same rates, income and cash investments may help to cushion your losses in the event of a downturn in the stock or bond markets.
