In all likelihood, you'll need some combination of asset classes to construct an effective and well-balanced portfolio. To achieve any goal, it helps to start early. Figure 1 shows how time can help build your investment portfolio. This graph is a hypothetical illustration and is not intended to represent the expected earnings of any investment.
Some people invest in individual stocks or bonds, but many use mutual funds.
This section provides a basic introduction to mutual funds and how they can be used. This financial cushion should be placed in a safe, easily accessible investment such as a money market fund, unless you have substantial assets. Some people rely on a home-equity line of credit for an emergency fund. A mutual fund is a company that pools money from many investors and purchases securities on their behalf. Each investor shares proportionately in the income or investment gains and losses that the fund's investments produce.