If you are looking to start investing money in stocks, bond, and mutual funds, there are a few key concepts that you should become familiarize yourself with before you begin.

Before you invest your hard earned money in stocks, bonds, or mutual funds, should know that:

1. You can lose money
2. It will more than likely take time to realize a return on your investment
3. You may want to consider other investments such as real estate or investing in your small business

Now that I have scared you off, let's look at the positive side of things. If you diversify your investment in stocks, bonds, and mutual funds, over time you will more than likely come out ahead of the game. Your investment strategy should reflect your risk tolerance and you should be absolutely sure that you are comfortable with your investment options. After all, you worked hard for your money and you should ask questions, become informed, and be completely comfortable with your investment decision.

If you decide to invest in stocks, bonds, or mutual funds, I highly recommend that you seek out professional advice with your best interest in mind. In other words, find a professional that is not compensated by receiving commissions on investment items.

Investment Basics

Stock - Usually referred to as common stock and it represents ownership in a publicly traded company. If you buy the stock, you become a partial owner of the company. You have voting rights concerning management and other initiatives and in some cases you can receive a share of the company profit in the form of dividends.

Bonds - When you buy bonds, you are lending an institution your money. Governments and corporations issue bonds. You make money by getting paid interest for your loan to the institution. Bonds have a yield or interest rate associated with them and it is determined by a number of factors including market conditions and credit rating of issuer. Think of a bond like your home loan, only you are the one loaning the money.

Mutual Funds - A mutual fund is a collection of stocks and / or bonds within one fund and is managed by professionals. By their nature, mutual funds are diversified because they include many company stocks and/ or bonds. When looking for a mutual fund, you will need to learn about the strategy of the fund, the competence of the management, and the costs associated with the fund.

I have only brushed the surface when it comes to investing in stocks, bonds, and mutual funds. If you want more information, you should seek professional advice and educate yourself as much as possible before you sink your hard earned money into any investment.

Written by moneyadvise.com editorial staff