Quick Guide to Investing: How to Choose Investments

With all the thousands of stocks, bonds and mutual funds available, it can sometimes feel a bit overwhelming to get started. How do you know which are the most appropriate investments to choose for your specific needs and goals?

1. Understand the purpose of different investment types

Review our Products and Solutions section to learn more about the various types of investments, their primary purposes, and how they might best fit into your investment strategy.

Stocks — shares of ownership in a particular company that fluctuate in value depending on the performance of the company and which can be traded on an exchange.

Bonds — when you buy a bond from the government, a municipality or a corporation, you are lending them money for a certain amount of time which they pay back with interest.

Mutual Funds — you can buy shares in a mutual fund which pools your money with that of other investors to buy tens or hundreds of different stocks (or other securities) for instant diversification.

ETFs — exchange-traded funds are investments typically designed to track the performance of a particular index, industry or market sector. They function much like mutual funds but can be traded like stocks.

Global Investments — there’s a world of investment opportunities beyond our shores and global investing lets you benefit from growth in other established and emerging countries.

Annuities — a contract between you and an insurance company where you give them a lump sum, and in return they promise to provide you with a stream of income for a certain number of years or your entire life.

2. Focus on asset classes and asset allocation more than on specific investments

History shows that different asset classes don’t always move in the same direction. For example large company stocks may outperform small company stocks one year, or international stocks may climb while U.S. stocks fall.

The idea behind “asset allocation” is that the types of investments you select matters far more than the specific investments you ultimately choose. Rather than getting lost in comparing Fund A with Fund B and Fund C, your time will be far better spent deciding on what percentage of your savings to put into each of the available asset classes such as stocks, bonds or money market funds.

Common Allocation Examples:

  • Aggressive: may appeal to investors with longer time horizons and higher risk tolerances.
  • Moderate: may appeal to investors with a medium time horizon and average risk tolerance.
  • Conservative: may appeal to investors looking to minimize short-term fluctuations and preserve their savings.

3. Diversify to smooth out your returns

By owning a wide variety of investments within each of your asset classes (most easily achieved through mutual funds and ETFs), you can help minimize the chance of a single underperforming stock or bond significantly impacting your portfolio – improving the balance between risk and return even more.

With our Signature AdvantageSM Brokerage account (brokerage provided by SunTrust Investment Services (STIS)), you can manage not just your investments, but all of your SunTrust checking and savings accounts too – all with the convenience of a single account.

The key to investment success is to be realistic and disciplined. Accept the fact that markets go up and down, strike a comfortable balance between risk and return, and stick with your plan. Want to learn more about how to better weather market ups and downs? Our article on Handling Market Volatility can provide helpful insights and ideas.

DISCLAIMERS

Asset allocation and diversification do not ensure against loss and do not assure a profit.

 

877.962.9032
Contact the STIS Client Advisory Center

Find a SunTrust Location

Go

Investing & Retirement Resource Center

  • Will Caring for Aging Parents Threaten Your Retirement?

    The financial obligations associated with caring for an aging parent can often coincide with other priorities. Of course you want to help out when possible; just don’t jeopardize your own future.

  • A Fresh Perspective on Retirement Income

    Faced with the potential to live 30+ years in retirement, the traditional approach to retirement income may no longer make sense.

  • Big Life Change? Three Retirement Rules of Thumb to Follow

    Big life changes can dramatically change how much money you’re able to save each month. Keep in mind these rules of thumb when life shakes things up.

  • Staying on Track with Your Retirement Investments

    Investing for your retirement over the long term takes a little knowledge and discipline. Though there can be no guarantee that any investment strategy will be successful—and all investing involves risk—there are ways to help yourself build your retirement cushion.

  • Donor Advised Funds: Family Giving Made Easy

    In 2014, Americans gave more than $358 billion to charity with nearly three-quarters of that amount coming directly from individuals. And while much of these donations come in the form of direct cash gifts, more and more individuals are turning to planned.