New to Investing?

2. Bonds, stocks and ETFs are the basic building blocks of many investment portfolios

There are many different types of investment products out there for investors to consider. 

The three common ones we’ll go over are bonds, stocks and ETFs, which are the basic building blocks of many investment portfolios. 

• Bonds. A bond is a loan from an investor to an organization or entity (like a corporation or the government) that’s looking to raise money to help pay for certain projects – think of it as an IOU. Bonds are a type of “fixed income” investment because they typically provide a predictable rate of income in the form of interest payments.
• Stocks. Stocks are also sometimes referred to as “equities.” When you purchase a stock, you own a piece or a “share” of a company. In general, while stocks are higher in risk than bonds, they also have higher expected long-term returns.
• Exchange-Traded Funds (ETFs). An ETF is a type of financial product made up of a basket of assets like stocks or bonds. For example, an ETF can contain a variety of bonds (bond ETF) or stocks (stock ETF). ETFs are traded like common stocks on an exchange, and their prices fluctuate during the day while they’re bought and sold. When you own shares of an ETF, you own a stake in a fund that may hold hundreds or even thousands of individual stocks or bonds.   

Now, let’s put this information in context: Given that stocks are higher risk than bonds, individuals who won’t need to tap into their investments for a long time (for instance, people who are early in their careers and are saving for retirement) might want to consider the potential benefits of putting most of their portfolio in stocks (or stock ETFs). The rationale is that these investors have time to weather the stock market’s fluctuations in hopes of earning higher long-term returns than those of bonds.

Individuals who have a shorter time horizon - say, people who are approaching retirement - may want to hold fewer dollars in stocks and more in bonds. That’s because generally, bonds are less volatile than stocks. And for investors who may not have as much time or flexibility to weather the ups and downs of the market, bonds could offer a greater degree of stability than stocks.

3. Diversification can help manage investment risks 

As we mentioned earlier, investing involves risk. A key to success is learning how to manage that risk in a smart way. 

One common strategy is diversification. Broadly speaking, this is where you divvy up your money across different investments to help spread out your investment risks. For example, you can diversify your holdings between different asset categories and within a particular asset category. 

While it might sound like a basic strategy, it’s a powerful one. By investing in a mix of assets, like stocks and bonds, if a certain class of assets isn’t doing well, other assets in your portfolio might be able to help offset the losses with gains. In other words, diversification can help limit your exposure to the risks of any one particular type of investment. 

You may know the saying: Don’t put all your eggs in one basket – that’s the basic idea behind diversification.

4. Your time horizon and risk tolerance are key factors to consider when investing

Time horizon simply refers to the amount of time you’re planning on staying invested. This typically depends on your age and financial goals.

People who won’t need to tap into their investments for a while – for instance, those who are a long way from retirement – would generally have a longer time horizon than, say, people who are investing money for a home down payment that’s five years down the road.

5. Income from your investments may be taxable

There are different tax regulations and rates for different types of investment income. Please consult IRS Publication 550 or a tax adviser for more information on which rules may apply to you.

Each year, your investment firm or account custodian will send you relevant tax information on your holdings to help you file your taxes.

We serve customers as an investment adviser

Portfolio recommendations from Marcus Invest are based on your time horizon, risk tolerance, and selected portfolio theme. We monitor your portfolio daily and rebalance your account periodically to keep it aligned with your target allocation. 

In connection with the recommendation of an investment portfolio and the rebalancing of your account, we act as an investment adviser and are registered with the Securities and Exchange Commission (SEC). 

For more information, see the Goldman Sachs & Co. LLC Marcus Invest Form ADV Part 2 Brochure and Brochure Supplements, which we filed with the SEC detailing our services.