Once you’ve accumulated savings to meet your emergency and reserve account goals, you can consider types of investments to meet your long term goals.  Look for investments that will earn enough to outpace the cost of living (i.e., inflation).  For example, if an investment earns 4 percent interest and the rate of inflation is also 4 percent, your savings will not increase in actual value, or buying power.  Don’t forget, types of investments with higher potential returns also carry greater potential risk.

Stocks.  When you buy stock, you become part owner of a company. In choosing stocks, you're looking for companies that you believe will perform well over time. Be sure to thoroughly research companies you're interested in, and make sure you understand the potential for profit or loss before you invest. If the company does well, you may receive dividends (i.e., a small portion of a company’s earnings usually paid to stockholders at regular intervals) and/or be able to sell your stock at a profit. Conversely, if the company does poorly and its stock price falls, the value of your investment will decrease.

There are two types of stock: common and preferred. As an owner of common stock, you are entitled to attend annual meetings and have voting rights. Common stock is usually riskier than preferred stock. Because of this, it offers greater potential returns and losses. As a shareholder of preferred stock, you would not usually have voting rights, but you would receive a fixed dividend, which would be paid to you before common stockholders are paid. But owners of preferred stock pay for that privilege--usually your dividends wouldn't increase when the company's profits increase. When a company does well, the price of its preferred stock tends to underperform its common shares. However, when a company fails, preferred stockholders are ahead of common stockholders in recouping their investment. When selecting stocks, it's good to keep in mind factors that could influence the company's performance--and, therefore, the investment.

How to read stock tables
Stock tables, which are in daily newspapers as well as online, can be confusing – a lot of information is presented in abbreviated form.  Once you learn what the abbreviations mean, most of the confusion will disappear.

• Stock This is an abbreviated form of the company's name, also called a symbol. Here, XYZ Co.'s common stock is listed as XYZ. Can't figure out the company from the name in the table? If a stock symbol is not obvious to you, an online service can help you determine the full company name.
• Div Dividend is the cash return paid on the stock. This listing shows us XYZ Co. is paying stockholders an annual cash dividend of $2 per share. 
• Yld% Yield is the percentage return paid on the stock. That $2 dividend equaled about 3.4 percent of XYZ Co's stock price.
• PE PE is the price to earnings ratio. PE (or p/e) compares the day's closing stock price to the company's profit per share over the last year. Here, XYZ Co. sold for 10 times earnings. A hot growth stock may sell at 25 times earnings or more. A troubled stock will have a low p/e.
• Vol 100s Volume is the number of shares traded that day. Multiply this number by 100 to get the real volume. On this day, 2.9 million XYZ Co. shares changed hands.
• Hi and Lo The high and low prices that day.  XYZ Co.'s high this day was 59 5/8, or $59.625. The low was 58 3/8, or $58.375.
• Close Close is where the stock ended that day. This is the last price a stock sold for on the day. XYZ Co.'s close was 59, or $59. In some papers, close is called "last."
• Net chg Net chg is the price change from the day before. XYZ Co. closed up 1/2 point, or 50 cents. Some newspapers use "Chg" instead.

Bonds. Bonds are a form of loan that you make to a corporation, the federal government and its agencies, or a local government. You become a creditor for a set period of time, called a term, and are paid interest by the borrower for the use of your money. Bond terms generally range from a few months up to 30 years. If you hold the bond until it matures (i.e., until the end of its term), the issuer promises to return to you the amount you originally paid, plus a fixed rate of interest. It is possible, however, for bond issuers to default, meaning they may be unwilling or unable to pay their debts, including the debt owed to holders of their bonds.  Generally, bonds are considered a safer investment than stocks because bondholders are paid before stockholders should a company become insolvent. Bonds are not FDIC insured.  Bond ratings measure credit risk. Several private agencies, such as Moody's and Standard & Poor's, rate bonds based on their assessment of underlying risk that the issuer may not be able to pay back the bond's principle and interest. The better the rating, the lower the interest the bond will usually pay. Generally the higher the yield, the greater the risk.

Remember: in extreme cases, the issuer of the bond can suspend interest payments or default entirely. Issuers can also buy back, or "call," the bonds before maturity if interest rates fall. You should study the call provisions thoroughly before buying a bond.

It’s important to understand the relationship between interest rates and bonds.  When interest rates go up, there is a risk that the market value of bonds will go down.  If the market value of a bond you own goes down and you want to sell before the bond’s maturity date, you may receive less than you originally paid for the bond and/or less than the maturity value of the bond.  The interest rate of bonds remains fixed.  For example, if you try to resell a bond when interest rates in general are higher than the bond’s interest rate, your bond will not be attractive to buyers, and its market value will drop. If your bond pays a higher interest rate than the bonds that are currently being sold, your bonds will be desirable to buyers and the price may go up.

There are many types of bonds, including:

• U.S. Savings bonds, Treasury bills (or T-bills) are sold by the federal government, are principal protected and not subject to interest rate risk. 
• Municipal bonds (or munis), sold by states, cities, and other local governments, are generally exempt from federal income taxes (i.e., you will pay no federal income tax on the interest).  Depending on the issuer, municipal bonds may be exempt from state and local taxes as well.
• Insured bonds generally pay lower interest rates, because a third party guarantees payment of interest and principal.  Insured bonds have less risk of default.
• Corporate Bonds issued by companies, may include the following types:
  • Zero coupon bonds, similar to savings bonds, do not pay interest during the life of the bond.  You buy zero coupon bonds at a deep discount from their face value.  Face value is the amount the bond will be worth when it "matures" or comes due.  At maturity, you receive one lump sum equal to the initial investment plus interest that has accrued over the life of the bond.  
  • Convertible bonds, which can be converted into stock.
  • High-yield bonds, commonly referred to as junk bonds, which are issued by corporations or governments with low ratings. They have a higher risk of default.

Mutual Funds
A mutual fund is a pool of money, supplied by investors like you, that is invested in various securities such as stocks, bonds, money market instruments, or a combination of these investments.  Every share of the mutual fund represents a proportion of ownership of the fund’s total assets (e.g., investments) as well as a proportion of the income those holdings generate.  The share value of a mutual fund will go up and down as market conditions change, and investors may make or lose money.  Typically, mutual funds have a professional manager or team of managers making day-to-day and minute-by-minute buy and sell decisions.

Each mutual fund is different in its make-up and philosophy. As an investor, you should look for funds with objectives and risk levels that match yours. If you're interested in a diversified mutual fund covering a single class of investments, there are many broad-based funds that invest in a wide variety of stocks. If you prefer to stick with single industries, you might consider sector funds such as real estate investment trusts (REITs), technology, and telecommunication funds, among others. Mutual funds are also a good way to invest in foreign stocks. Some funds own hundreds of different securities, while others may own only a few dozen.

The two most common types of mutual funds are equity funds that invest primarily in common stocks and fixed-income funds or "bond funds" that typically invest in bonds or money market securities. Less common are "balanced funds" invested in both equity and debt.

By investing in mutual funds, you can diversify your types of investments and help to balance risk  – but there are literally thousands of mutual funds and their relative risk varies widely. 

Mutual funds are sold by prospectus, which is available from your registered representative.  Carefully consider investment objectives, risks, charges, and expenses before investing.  For this and other information about any mutual fund investment, please obtain a prospectus and read it carefully before you invest.  Investment return and principal value will fluctuate with changes in market conditions such that shares may be worth more or less than original cost when redeemed.  Diversification cannot eliminate the risk of investment losses. 

Your Home. Many people don't think of a home in investment terms, but it may be the largest, single investment you'll make. That's why it's important to choose your home with an eye toward long-term value. Keep your home in good repair to maintain or even improve its market value. Market value is based on such things as house style, square footage, location/neighborhood, school district, property taxes and transportation. Consider as many factors as you can when purchasing.  For example, the quality of the school district may seem unimportant to you if your children are grown.  However, when you decide to sell your house, potential buyers with children may not want to look in your area.  Read more helpful tips at Life Advice: Buying A Home and Life Advice: Selling a Home.