Corporate Bonds Include corporate bonds in your bond investing strategy to get the highest interest rates. Corporate bonds are bonds issued by businesses. These bonds are sold and traded much like stocks. Because there is a chance that the corporation may fold during the term of the bond, interest rates are often higher than for government bonds. Junk bonds are a type of corporate bond issued by a company with a low credit score. Although interest rates for junk bonds are higher than for their conservative counterparts, the risk of default is also much higher as well. For this reason, it is best for most investors to stick with the traditional corporate bond. Investing in Stocks Benefit from a company's growth by investing in the company's stock. A stock is essentially a portion of a company. When a company wants to raise money, one option for them is to offer part ownership in the company in the form of stocks. These stocks can be bought through the company directly or through a stock broker. When you own a stock, you get the ability to vote for company officers and policies and attend shareholder meetings. You will get an annual report that gives you information about how the company is doing. If many people believe the company will do well in the future, they will want to buy into the stock and your stock value will go up. If more people believe the company will do poorly, they will sell their shares and your stock value will go down. Insider Trading The term "insider trading" actually describes two different actions. Legal insider trading is when company officers trade the stock of their own company. As long as they record their trades with the SEC, this action is legal. Illegal insider trading occurs when someone trades a stock based on nonpublic information. The SEC is strict about illegal insider trading because when some people are allowed to take advantage of privileged information, they receive an unfair advantage. Those without connections can lose faith in the fairness of the market. Diversify Your Mutual Funds Invest in multiple mutual funds to diversify your portfolio. After you've invested in a standard index fund, look into industries and markets that interest you. Compare mutual funds that concentrate on different aspects of the market. By using mutual funds to invest in different market segments, you'll be able to take advantage of larger trends without exposing yourself to as much risk. Just make sure that none of the holdings in your mutual funds overlap as that defeats the purpose of diversification.