Saving and Investing for Students

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SAVING AND INVESTING
THE BASIC TYPES OF PRODUCTS
Savings
Investments
Savings accounts
Bonds
Certificates of deposit
Stocks
Checking accounts
Mutual funds, Exchange-traded funds
Real estate
Commodities (gold, silver, etc.)
What about risk?
All investments involve taking on risk. It’s important that you 
go into any investment in stocks, bonds or mutual funds with a 
full understanding that you could lose some or all of your money 
in any one investment. While over the long term the stock market 
has historically provided around 10% annual returns (closer to 6% 
or 7% “real” returns when you subtract for the effects of inflation), 
the long term does sometimes take a rather long, long time to play 
out. Those who invested all of their money in the stock market at 
its peak in 1929 (before the stock market crash) would wait over 
20 years to see the stock market return to the same level.
However, those that kept adding money to the market 
throughout that time would have done very well for them-
selves, as the lower cost of stocks in the 1930s made for some 
hefty gains for those who bought and held over the course of 
the next twenty years or more. 
It is often said that the greater the risk, the greater the po-
tential reward in investing, but taking on unnecessary risk is 
often avoidable. Investors best protect themselves against risk 
by spreading their money among various investments, hop-
ing that if one investment loses money, the other investments 
will more than make up for those losses. This strategy, called 

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U.S. SECURITIES AND EXCHANGE COMMISSION
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“ diversification,” can be neatly summed up as, “Don’t put all 
your eggs in one basket.” Investors also protect themselves from 
the risk of investing all their money at the wrong time (think 
1929) by following a consistent pattern of adding new money 
to their investments over long periods of time. 
Once you’ve saved money for investing, consider carefully all 
your options and think about what diversification strategy makes 
sense for you. While the SEC cannot recommend any particular 
investment product, you should know that a vast array of invest-
ment products exists—including stocks and stock mutual funds, 
corporate and municipal bonds, bond mutual funds, certificates 
of deposit, money market funds, and U.S. Treasury securities.
Diversification can’t guarantee that your investments won’t 
suffer if the market drops. But it can improve the chances that 
you won’t lose money, or that if you do, it won’t be as much as 
if you weren’t diversified.