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Asset Classes Part 3: Stocks vs Stock Funds

Summary: Morningstar admits that low expense ratios can better predict a fund's future performance than their own star ratings.

Stocks have always outperformed bonds in any 20 year period, growing on average 7% a year with periods of huge decline.

What is a Stock?

Stock is a claim to the ownership and rights to the value of a company. You buy shares of company stock with the expectation that its value (price) will increase so you can sell your shares for more than you bought it for.

What is a Stock Fund?

Investing in Stocks and Bonds for Beginners

On The Best of Sett

Summary: Most funds require a minimum investment of $3,000. But you can invest in several index funds through Betterment, which doesn't have minimum deposits or hidden fees, and makes investing much simpler by selecting several index funds for you.

We’ve come a long way! As a reminder, here is a cheat sheet to remind you of what you can expect from each investment.

You can feel that money burning a hole in your pocket, and want to start investing right away I can tell. Let's look at some of your options as far as brokerages:

Your employer's 401k: Chances are, the investment options provided by your employer's retirement plan are limited and the fees are high (average .71%/person in 2011). However, you should contribute at least as much as your employer will match- something like a 50% match up to 6% of your paycheck. 50% risk-free return in a tax-deferred account? That's a no-brainer.

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