There are three basic types of investments:  stocks, bonds, and short term.

1.  Stocks represent ownership of a company or firm and are bought and sold in shares.  Stocks can gain or lose value over time, and their prices tend to go up and down over the short term more often and more dramatically than bonds.  Some stocks may pay a dividend, which can provide residual income even if the stock price goes down in value.  Stocks have offered a greater return average than other types of investments, but also come with a greater risk of losing money.  Stocks are good investment for someone just starting out in life.

2.  Bonds are securities sold by the government or companies.  The government or company borrows your money and agrees to pay you a specific interest rate up to the maturity date of the loan.  Much of the return on bonds is from the interest that is paid, but bonds can also increase or decrease in value over time for a variety of reasons.  Over the short term, bond prices tend to go up and down less than stocks, but bonds have offered a lower average return than stocks.  Bonds are good investments for someone who is middle aged and doesn't want to put their entire portfolio at risk.

3.. Short term investments tend to be more stable than stocks and bonds, meaning they don't go up and down in value nearly as much.  Although short term investments generally don't decrease in value, they tend not to generate large returns like stocks and bonds.  Short term investments are rather boring but usually offer guaranteed income.  These investments include, savings accounts, money market accounts, and short term CDs.  Short term investments are good for retirees.