Every investor has to start somewhere.

Before you can start investing you need to know how it all works. Simply put, investing is using your money to make more money. And investing doesn't necessarily stocks. There are actually three basic types of investments you can choose from — stocks, bonds and cash. Each has advantages and disadvantages, which we'll get into.

• Stocks. A share of stock represents a percentage of ownership in a company. With stock you can make money two ways. The first is when the share price rises above the price you paid for it. The second is, if the company pays dividends, you'll earn an amount determined by the company for each share you own. Keep in mind there is a risk of losing money if the share price falls below the amount you paid.
• Bonds. A bond is a lot like an IOU. When you buy a bond, you're essentially loaning your money to whomever issued the bond. In return, the issuer promises to pay back your money plus a fixed amount of interest on a set date. Bonds can be issued by companies (corporate bonds), state or local governments and agencies (municipal bonds), and the U.S. Treasury (T-Bills). Remember, as with any IOU there is a risk that the borrower may not be able to repay you. This is called default risk. The other risk with bonds is that interest rates can fluctuate.
• Cash and cash equivalents. These types of investments, checking, savings and money market accounts-are low-risk and low-return. Their safety makes them ideal for shorter-term goals, day-to-day expenses and emergency funds. That safety, however, comes with a trade-off, since what you can earn in interest will most likely be lower than with stocks or bonds. To earn a higher interest rate, you can also consider Certificates of Deposit (CDs) and T-Bills. But you will have to hold them for a set period of time, meaning you won't be able to access the money for as long as 12 months.

There's no such thing as a sure thing in investing. But the more risk you're willing to take on, the more you could potentially make from that investment. And sticking to safe investments will usually lower your return. So what can you do? By putting your money into a well-diversified mix of investments, you can minimize your risk. One of the simplest and most efficient ways to do that is by investing in a diversified mutual fund. For instance, a balanced mutual fund generally invests in a mix of stocks, bonds and cash. You also get the benefit of professional fund management.

People invest for all kinds of reasons. If you're saving for a down payment, for instance, you'll want to earn interest without risking what you've saved. So if you'll need the money in the next three to five years, stick to more secure investments such as short-term bonds and CDs. Or consider high-yield checking and savings accounts. On the other hand, you'll need a lot more money for retirement or your child's college education. So if you won't need the money for 15 to 30 years, use the time to give your money every chance to grow. In that case, consider mutual funds.

By checking your progress every few months and comparing your returns against benchmarks such as the overall market, you'll quickly see if you need to make changes. And if you ever feel like you need help, don't hesitate to ask.

Regardless of how much money you have, every Schwab client can get a complimentary one-on-one consultation. Whether you need help with selecting mutual funds or just want someone to talk to about your goals, Schwab experts are ready to help.