That said, stocks come in many different flavors.

They represent all industries, with some based in the U. Stocks also come in all sizes: There are large-cap, mid-cap and small-cap stocks.

According to Ibbotson Associates, small caps have grown by an average 12 percent annually over the past eight decades. In general, bonds are considered safer investments than stocks. It depends on the bond you buy. They mature — or come due — in various time periods. Treasury bills generally mature in three months while Treasury notes typically mature within a year.

Treasury bonds mature over longer time frames, usually between five and 30 years.

Historically, long-term government bonds have returned an average of 5. Local and state governments also issue bonds. That said, municipal bonds have a distinct advantage: Income is generally exempt from federal taxes and sometimes free from state taxes, too.

Think of these as baskets that may contain bonds, stocks and cash equivalents. With thousands to choose from, mutual funds come in a variety of styles. They may hold a single type of asset, such as only domestic large-cap stocks, or a blend of investments, such as a balanced fund with a mix of stocks and bonds.

Mutual funds also come in a variety of styles. Mutual funds enable investors to buy a multitude of assets relatively cheaply. Finally, mutual fund companies are generally run by managers who pay close attention to how assets are performing.

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Mixed-Asset Mutual Funds Offer the Best of Both Stocks and Bonds - AOL Finance

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Stocks, bonds and mutual funds Bankrate. Consider the following riskier alternatives. What does that mean? The usual suspects Losing principal. What you invest in goes belly up and you lose a lot or everything. Not keeping up with inflation. Prices go up faster than your investments, eroding your spending power. Treasury and municipal bonds and cash equivalents. Investment costs make it difficult for fund managers to beat their benchmarks.

Certain mutual funds, especially those that are actively managed as well as those that have sales loads. The 10 best states for your retirement Retirement. Contributing to an IRA during retirement.

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