Investing is simply taking some of the money you have left after meeting your financial responsibilities and putting it where it will make more money over time — rather than sitting in a savings account. Depending on your goals, these could be short or long-term investments. 

If you have an emergency fund in place, along with a solid spending plan — and still have a little extra cash to spare each month — consider investing what you’ve got left. 

Here’s what you need to know to get started.

Types of investments

Stocks, bonds and cash are the most common types of investments. 

Stocks are shares of ownership in a company. These shares represent a claim on the company's assets and earnings. 

Bonds are a debt investment. An investor loans money to an entity (such as a local government) to borrow funds for a defined period of time at a variable or fixed interest rate. Owners of bonds are debtholders, or creditors, of the issuer. 

Cash is a short-term obligation — usually less than 90 days — that provides a return in the form of interest payments. 

In general, stocks tend to fluctuate more than bonds, but grow more over the long term. Bonds tend to be more of a stable investment with guaranteed income. Cash is the safest, but lowest-performing asset.

Picking the right mix of investments

If you decide to invest your money, asset allocation is one of the most important decisions you’ll make. It’s all about balancing risk and reward by picking the right combination of stocks, bonds and cash to build your portfolio and meet your investment goals. 

Even under the same economic conditions, stocks, bonds, and cash tend to perform differently. While one asset category may increase in value, another may decrease. If your portfolio is spread out among different asset classes based on your risk tolerance, there could be ups and downs. 

All investments come with risks. It’s important to make sure the downs aren’t more than you are comfortable losing.

Turn to a trusted financial partner

Becoming an investor can be a good way to work toward your long-term financial goals. Talk to an expert who can walk you through different options to ensure your decisions make sense for your financial goals.