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Frequently Asked Questions

Investing is the process of allocating money to assets with the expectation that they may generate income, increase in value, or contribute to a financial objective over time. Investments can include stocks, bonds, funds, real estate, commodities, private-market assets, and other financial instruments.
Common asset classes include equities, fixed income, cash, real estate, commodities, and alternative investments. Each asset class behaves differently and can respond to economic conditions, interest rates, inflation, and market sentiment in different ways.
The stock market allows investors to buy and sell shares representing ownership in publicly traded companies. Share prices change as buyers and sellers respond to company performance, economic conditions, interest rates, expectations, valuations, and other market information.
A bond is a debt security through which an investor lends money to a government, corporation, or other issuer. In return, the issuer generally agrees to make interest payments and repay the principal according to the terms of the bond.
Funds pool money from multiple investors and invest it according to a defined strategy. ETFs, or exchange-traded funds, are pooled investment vehicles whose shares trade on exchanges. Funds and ETFs can provide exposure to many securities through a single investment vehicle.
Real estate investing involves allocating capital to property or property-related investments. Potential returns may come from rental income, changes in property value, or both. Investors can gain exposure directly through property ownership or indirectly through real estate investment vehicles.
Commodities are basic physical goods such as oil, natural gas, gold, industrial metals, and agricultural products. Commodity prices can be influenced by supply and demand, economic activity, weather, geopolitical events, currencies, and production conditions.
Private markets include investments that are not traded on public securities exchanges. Examples can include private equity, private credit, venture capital, and certain private real estate investments. These assets can differ significantly from public investments in liquidity, transparency, and access.
Digital assets are assets represented and transferred digitally, often using blockchain or distributed-ledger technology. The category can include cryptocurrencies, tokens, and other blockchain-based assets. Digital assets can involve substantial volatility as well as technological, custody, market, and regulatory risks.
An investment portfolio is a collection of investments held or managed together. A portfolio may contain stocks, bonds, funds, cash, real estate, and other assets depending on its objectives, time horizon, liquidity requirements, and approach to risk.
Asset allocation is the way investment capital is divided among different asset classes. The mix of equities, fixed income, cash, real estate, and other assets can have a significant influence on a portfolio's potential return, volatility, liquidity, and overall risk.
Diversification spreads investment exposure across different assets, companies, sectors, markets, or regions. It can reduce the degree to which a portfolio depends on the performance of one investment or one source of risk.
No. Diversification can help reduce concentration in individual investments or sources of risk, but it cannot eliminate investment risk or guarantee against losses. During broad market declines, several asset classes may fall at the same time.
Portfolio risk is the uncertainty associated with the combined investments in a portfolio. It depends not only on the risks of individual holdings but also on their relative sizes and how those investments behave in relation to one another.
Portfolio rebalancing is the process of adjusting investments after market movements or other changes cause the portfolio to move away from its intended asset allocation. Rebalancing can involve buying, selling, or redirecting new contributions.
There is no single rebalancing schedule appropriate for every portfolio. Rebalancing can be reviewed periodically or when allocations move beyond predetermined ranges. Transaction costs, taxes, market conditions, and the size of the allocation change may also be relevant considerations.
Portfolio performance can be evaluated using measures such as total return, income, capital appreciation, volatility, drawdowns, and risk-adjusted return. Results may also be compared with an appropriate benchmark or the portfolio's stated objectives.
A benchmark is a reference point used to evaluate investment performance. Market indexes are commonly used as benchmarks, although an appropriate comparison should reflect the assets, strategy, and risk characteristics of the portfolio being evaluated.
Active investing involves selecting securities and making portfolio decisions based on research, analysis, valuation, market conditions, or a defined investment strategy. Active managers may adjust holdings in an effort to achieve a particular objective or outperform a benchmark.
Passive investing generally seeks to follow a market index or predefined group of securities rather than frequently selecting investments based on forecasts. Index funds and many ETFs are commonly associated with passive investment strategies.
Active investing relies on ongoing investment selection and management, while passive investing generally follows an index or predetermined portfolio. The approaches can differ in trading activity, costs, decision-making, and the degree to which performance may differ from a market benchmark.
Growth investing focuses on companies expected to expand revenue, earnings, market share, or business activity at relatively strong rates. Growth companies may reinvest substantial amounts of capital into expansion rather than distributing it to shareholders.
Value investing focuses on securities that appear to trade below an investor's estimate of their underlying or intrinsic value. Analysis may consider company earnings, assets, cash flow, financial condition, competitive position, and valuation ratios.
Income investing emphasizes investments that can generate recurring cash flow. Potential sources of investment income include stock dividends, bond interest, distributions from funds, and income generated by certain real estate investments.
Long-term investing involves maintaining an investment strategy over an extended period rather than focusing primarily on short-term market movements. A longer horizon can provide more time for compounding and market cycles, but it does not guarantee positive returns.
Systematic investing uses predefined rules, models, schedules, or other repeatable processes to structure investment decisions. Examples can include regular contributions, rules-based asset allocation, or strategies based on specified financial indicators.
Thematic investing organizes investments around long-term trends or structural changes, such as technological development, demographic shifts, infrastructure, energy systems, or other economic themes. A compelling theme does not automatically make every investment associated with it attractive.
An economic cycle describes changes in economic activity over time, commonly including periods of expansion, slowdown, recession, and recovery. Employment, consumer spending, business activity, inflation, and monetary policy can all change as the economy moves through different phases.
Interest rates influence borrowing costs, bond prices and yields, business investment, consumer spending, real estate financing, and asset valuations. Changes in rates can therefore affect stocks, bonds, property, currencies, and other parts of financial markets.
Inflation reduces the purchasing power of money and can affect business costs, interest rates, consumer spending, and investment valuations. Investors may therefore consider both nominal returns and the return remaining after the effect of inflation.
Market volatility describes the degree and frequency of changes in investment prices. Volatility can increase because of economic news, interest-rate changes, company results, geopolitical events, shifts in investor expectations, or periods of broader uncertainty.
A market correction is a meaningful decline from a recent market high. Corrections can occur when investor expectations change because of economic conditions, interest rates, company earnings, valuations, or other factors. They are a recurring feature of financial markets.
A bull market describes an extended period of generally rising asset prices, while a bear market describes a prolonged period of broadly declining prices. These market environments can reflect changes in economic conditions, company earnings, valuations, liquidity, and investor sentiment.
Investment risk is the uncertainty surrounding an investment outcome, including the possibility of losing capital. Different investments can be exposed to market, liquidity, credit, interest-rate, inflation, concentration, currency, and other forms of risk.
Investments with greater uncertainty may offer the possibility of higher returns, but they can also expose investors to larger losses. Taking additional risk does not guarantee additional return. Risk and potential return must therefore be considered together rather than independently.
Market risk is the possibility that broad movements in financial markets may reduce the value of an investment or portfolio. Economic developments, interest rates, investor sentiment, geopolitical events, and financial conditions can contribute to market-wide price changes.
Liquidity risk is the possibility that an investment cannot be sold quickly or efficiently at a price close to its expected market value. Less-liquid investments may require more time to sell or may need to be sold at a significant discount.
Concentration risk occurs when a large portion of a portfolio depends on a single investment, company, industry, market, geographic region, or other exposure. A negative development affecting that exposure can then have a disproportionate effect on the portfolio.
Capital preservation is an investment objective that places greater emphasis on limiting significant losses and protecting existing capital. It does not mean that all risk can be removed, since inflation, credit conditions, liquidity, and other factors can still affect capital.
Wealth planning connects financial resources with short-, medium-, and long-term objectives. It can involve saving, investing, liquidity planning, retirement considerations, risk management, and decisions about how accumulated capital may be used or preserved over time.
Financial goals give saving and investment decisions a clearer purpose. Defining the amount required, the expected time frame, and the importance of each objective can help provide structure for decisions about contributions, liquidity, asset allocation, and risk.
Investing can put accumulated savings to work in assets that may generate income or increase in value over time. Regular contributions, reinvestment, time, and compound growth can all contribute to wealth accumulation, although investment outcomes remain uncertain.
Retirement investing can involve considerations such as time horizon, regular contributions, inflation, diversification, liquidity, expected withdrawals, longevity, and the amount of investment risk. These considerations can change as retirement approaches and withdrawals begin.
Investment time horizon is the period between investing capital and when that capital is expected to be needed. A longer horizon may provide more time to experience market cycles, while a shorter horizon can make liquidity and the consequences of market losses more significant.
Compound growth occurs when investment returns remain invested and can generate additional returns in later periods. Over time, growth can therefore come from both the original capital and previously accumulated returns. Actual market returns, however, fluctuate and are not guaranteed.
Wealth preservation focuses on maintaining accumulated financial resources over time while managing risks that can reduce their value. Considerations can include investment losses, inflation, concentration, liquidity, withdrawals, costs, and changing financial needs. Preservation does not mean eliminating every form of risk.
No. The content on this website is provided for general educational and informational purposes. It does not take into account an individual's financial circumstances, objectives, risk tolerance, tax situation, or other personal factors and should not be interpreted as personalized investment, financial, legal, or tax advice. Please review our Investment Disclaimer for additional information.
No. References to stocks, bonds, funds, ETFs, real estate, commodities, digital assets, investment strategies, or other financial instruments are intended to explain investment concepts. They should not be interpreted as recommendations to buy, sell, or hold a particular investment.
No. Investment returns are not guaranteed. Market conditions, company performance, interest rates, inflation, economic developments, investment costs, timing, and many other factors can affect results. Investors may receive back less than the amount originally invested.
No. Historical performance can provide information about how an investment, market, or strategy behaved under previous conditions, but it does not guarantee or reliably determine future results. Future market conditions can differ substantially from those experienced in the past.