Everything looks good and promises such wonderful rewards, but overindulging -- especially in the wrong confection -- can bring with it a world-class upset stomach.
To begin, understand that all investments have their inherent perks and pitfalls.
Some may promise richer profits. Others come with less risk. That's why understanding how these investments function is such a vital step in crafting the best retirement plan possible.
Most investments can be categorized as stocks, bonds or mutual funds.
Stocks
Also called equities, stocks are like sports cars: They're fast, they're sexy and they appeal to buyers that like a little vroom.
Indeed, few other asset classes can match the potential of publicly held stocks. They've been the cornerstone to most retirement accounts because they've boasted higher returns than many other investments, clipping along at an average 10.4 percent a year between 1925 and 2006, according to Ibbotson Associates.
Stocks come in all shapes and sizes -- for every industry imaginable, U.S.-based and overseas alike -- and usually are categorized as large-cap, mid-cap and small-cap. The term "cap" is short for "market capitalization," which is computed by multiplying share price by the number of a company's outstanding shares.
