I'm sure the question has been asked many times, "what are the best investments"?  There could be any hundreds of different answers to this question because there are so many different variables.  The following are just a few possible variables:

• Amount of money to invest
• Amount of time to devote to research and investing
• Current skill level
• Possible future education
• How the economy is doing
• The investment's risk

The list goes on...  Basically what I am saying is that I can't tell you what the best investments are because it would be a biased opinion.  I can, however, give you a brief overview of some of the best investments to get started in.

If you have heard about investing, you've probably heard about stocks.  Stocks are one of the most popular and commonly known investments, though not the most traded.  Currency is the most traded security in the world. 

What is a Stock?

When a corporation decides they need more funds to operate or expand their business, they will issue more stock, or stock for the first time.  Buyers can buy these shares of stock and sell it whenever they wish.  They must sell the stock on the specific stock exchange it is listed.

In order to profit from stocks, you must buy stock at one low price and sell it for a higher price.  There are other ways of doing it as well such as selling short or using derivatives, but this is the basics of stocks and is used by many people.

Why are stocks one of the best investments?  They are great becuase they are simple and, done right, you can continue to earn money from stocks.  Yes, some days you'll lose money, even some years such as during a recession, but on average you should be able to make a profit.

Of course, there are many variables to this such as the risks you are taking and how well you diversify your investment, but this is basically how it works and with hard work and research, you will hopefully earn a return.

Bonds are another very common investment and one of the best investments for low risk.  There are both very low and very high risk bonds available, but we will get into more detail of that later on.

What is a bond?

A bond is basically the buyer of the bond lending money to the seller.  Let's take government bonds for example. Let's say you buy a government bond with a face value of $1,000.  You pay $1,000 and that $1,000 is lent to the government.  We'll say that bond will mature in 10 years and that it has an interest rate of 4%.  In 10 years, you will receive back the initial $1,000 you paid plus interest which in this situation compounded over 10 years would be $480.  You would receive about $1,480.

There are many more complexities to bonds such as discount bonds, coupon rates, etc., but these are the basics.

You can purchase bonds from federal, state, and municipal governments.  The interest earned on municipal bonds is tax free.  Government bonds are the least risky investments available. They have virtually no risk, but they will also give you a small return than other investments.  Government bonds are the best investments for those who are risk averse.

Corporations also issue bonds.  These are different than stocks because the corporation is borrowing money whereas with stocks they are selling part ownership of the company.

Bonds are rated by rating agencies on a letter basis.  For example, AAA is the least risky where as BB or CCC are riskier.  The farther down you go, the more risky they are.  Some bonds give rates in the high double digits and are very risky.  These are often referred to as junk bonds.  As a beginner, I wouldn't recommend junk bonds.  They are not one of the best investments.

Finally, we will discuss mutual funds.  These three types of investments are not the only investments and are not necessarily the best investments, but they are a great place to start for beginners looking for the best investment.

A mutual fund can be sold in shares just as stocks are.  The difference is that they are not for a corporation.  Mutual funds contain samples of many other securities, often stocks and bonds. 

This is basically how they work:

• Many people, often hundreds or thousands, pool together the money they have to invest and continue adding money to the pool whenever they want.
• The manager of the fund chooses what stocks, bonds, and/or other securities to invest that pool of money in often buying and selling stock periodically as things change and people invest more.
• You own a share of that pool and receive the gains and dividends collectively with the other investments.

Mutual funds are great because you don't have to research individual companies and buy individual stocks.  You also don't have to worry about diversifying because they are often so diversified to begin with. 

Mutual funds are often said to be the best investments, but again, that's hard to say.  They are great for people who don't know much about investing or who don't want to spend much time researching.