When it is time to invest it is crucial not to put all your eggs in one basket. If you do, you risk the possibility of significant losses when a single investment performs poorly. A better strategy is to diversify across the different types of assets, including stocks (representing shares of companies) bonds, stocks, and cash. This helps to reduce investment returns fluctuations and allows you to reap the benefits of higher long-term growth.

There are several kinds of funds, such as mutual funds exchange-traded funds, unit trusts (also known as open-ended investment companies or OEICs). They pool funds from many investors to purchase stocks, bonds or other assets and share in the gains or losses.

Each type of fund is unique and has its own risks. For instance, a money market fund invests in short-term securities that are issued by federal, state and local governments or U.S. corporations and typically has low risk. Bond funds tend to have lower yields but have historically been less volatile than stocks, and offer a steady income. Growth funds search for stocks that don’t pay a regular dividend however they have the potential to grow in value and generate more a knockout post than average financial gains. Index funds track a particular market index, such as the Standard and Poor’s 500, sector funds are focused on a specific industry segment.

Whether you choose to invest with an online broker, robo-advisor, or another option, it’s important to be aware of the types of investments available and the conditions they apply to. Cost is a major aspect, as charges and fees will eat away at your investment returns. The best online brokers and robo-advisors are transparent about their charges and minimums, as well as providing educational tools to assist you in making informed choices.