Expertise

• The amount of financial expertise and time you have to research investments, as well as the confidence you have in your own abilities, will greatly influence how you will choose to invest. If you feel confident, you can consider a brokerage account, in which you make the decisions on which stocks and bonds to invest in and pay a small transaction fee each time you buy or sell. If you would prefer to have you money professionally managed, you should look into mutual funds, which combine the money of many investors into one fund that has financial experts managing it. In exchange for this professional oversight, you will pay a management fee, usually a small percentage of your total assets under management. Index funds, which strive to mirror the composition of indexes such as the S&P 500, tend to have the lowest management fees and to match the performance of the index being mirrored.
  
  

Liquidity

• When investing, you should carefully consider when you might need to access the money. How liquid an investment is refers to how quickly you can cash out if needed. More liquid accounts include money market accounts, stocks and mutual funds because you can easily cash out your investment. If you will not be needing the money for a long period of time, you can consider certificates of deposit and investing in your 401(k) or IRA. Certificates of deposit require you to leave your money in the account until the account matures, which can be anywhere from a week to 10 years or longer. IRAs and 401(k) plans offer tax advantages, but you cannot withdraw your money until age 59 1/2.
  
  

Risk

• The investment choices you make depend on how much risk you are willing to accept. If you are investing money that you cannot afford to lose or you know you will need in a year, you should chose an investment that has a fixed return or at least a low risk, such as a money market account or certificate of deposit. Investments like stocks and mutual funds are riskier because there is no promised rate of return and you could lose money if the company or fund does poorly. However, stocks and mutual funds will usually have a higher rate of return over the long term even though they will likely suffer several lean years.