Investing allows individuals to grow their money and receive long-term financial security. However, investing also carries risks as well, as you can lose money depending on the type of investment and changing economic and market conditions. Investment options fall into three major categories: Stocks, Bonds, and Cash/Cash equivalents.
Stocks: "A stock — also known as a share or equity — is a type of investment representing ownership in a company. Companies sell stock to raise money to fund their business. You become a shareholder and own part of the company when you buy stock. Stocks carry the most risks and highest returns."
Bonds: "A bond is an investment representing a loan made by an investor to a borrower — typically a business or government entity. The borrower promises the debt will be paid back with interest at a specific time. Bonds are typically issued by companies, municipalities, states, and sovereign governments to finance projects and operations. Bonds are generally less volatile than stocks but offer more modest returns."
Cash: "Cash and cash equivalents such as savings accounts, money markets, and certificates of deposit (CDs) are intended to be relatively safe and accessible. They tend to offer relatively low yields and returns because there’s not as much risk associated with these products, like with stocks or bonds. This typically makes cash and cash equivalent products a poor choice for long-term goals because many of them won’t even keep up with inflation. Cash and cash equivalents are the safest investments, but offer the lowest return of the three major asset categories."
Source: Investor.gov; finred.usalearning.gov