Clean Up Your Finances Before You Invest (5)

A bond is a certificate of debt issued by the government or a company with a promise to pay a specified sum of money at a future date.


Bonds carry a fixed interest rate.



The term of a bond can range from a few months to 30 years.



Bonds can be traded and are considered to be safer than stocks because bondholders are paid before stockholders if a company goes bankrupt.



Mutual funds are professionally managed pools of money from a group of investors.



A mutual fund manager invests your funds in securities like stocks and bonds, money market instruments or a combination of all of them depending on the fund's investment objectives.



Investing in mutual funds allows you to diversify, which makes the investment less risky.



Keep in mind that mutual funds usually charge a fee for the service and you will have to pay taxes on any profits you earn.