Investment Tutorial

A quick primer on the different types of investments.

What are stocks?

Stocks represent partial ownership of a corporation. A stock can increase in value through a rise in the market price of its shares. Many stocks also pay dividends.

Key risk: Stock prices move unpredictably depending on the company’s performance, market swings and the economy. Stocks have yielded the highest returns over the long term but can also experience prolonged downturns. Keep in mind that foreign investing involves additional risks including currency fluctuations and political uncertainty.

What are bonds?

Bonds are longer-term loans made to a company, government or government agency. The borrower, or issuer, agrees to repay the principal after a certain period and also may make regular interest payments along the way.

Key risk: If interest rates increase, bond prices usually fall. Conversely, if rates fall, bond prices generally rise. In addition to interest rate risk, bonds are subject to credit and inflation risk.

What are short-term reserves?

Short-term reserves are short-term loans to credit worthy borrowers. They are designed to preserve the principal value of your investment and provide income that rises and falls with short-term interest rates. Examples are U.S. Treasury bills, CDs and money market instruments.

Key risk: Because short-term reserves are conservative, they usually generate the lowest returns and are vulnerable to the effects of inflation. Keep in mind that while U.S. Treasury or government agency securities provide substantial protection against credit risk, they do not protect investors against price changes due to changing interest rates. The market values of government securities are not guaranteed and will fluctuate.

What are mutual funds?

Mutual funds are investment vehicles that pool money from many individuals to buy securities, such as stocks, bonds and short-term reserves.

Key risk: Please refer to the risk information for stocks, bonds and short-term reserves.

According to this article from CBS MoneyWatch.com – 401(k) Tip: Do Less, Earn 2 Percentage Points More – the median return earned by individuals who sought help in managing their 401(k) was almost 2% more than those who made their own allocation and investment decisions.

Want more investment guidance via Vanguard.com?

Through Vanguard, you can find a variety of investment help: from just a little guidance to some major handholding.

Check out 5 lessons every investor should know. Experts Burton Malkiel and Charles Ellis discuss in straightforward terms the key lessons every investor should know. Dr. Malkiel is the author of A Random Walk Down Wall Street, and Dr. Ellis is the author of Winning the Loser's Game.

What does investment advice cost?

If you decide to go the route of getting an investment advisor, you might want to know the cost of investment advice. It’s important to know how financial advisors are paid and to beware of conflicts of interest. Also, don’t forget to consider the variety of help available from Vanguard.

For more information about any FedEx 401(k) Plan investment fund, including investment objectives, risks, charges and expenses, call The Vanguard Group at 1.800.523.1188 to obtain a prospectus. The prospectus contains this and other important information about the fund. Read and consider the prospectus information carefully before you invest. You can also download Vanguard fund prospectuses at vanguard.com.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

Vanguard is a trademark of The Vanguard Group, Inc.

Next: Funds in the 401k