A good way to achieve automatic diversification of your long-term equity and fixed-income investments is to invest in a mutual fund. If you still have funds available for long-term goals after contributing to your TSP, then you may want to consider these investment products.

A mutual fund is a type of investment that pools the money of many individuals and acquires a portfolio of securities that is owned proportionally by each investor. Open-end mutual funds are purchased directly from a fund company (for example: Fidelity, T Rowe Price, and Vanguard). The Web sites for these and other fund companies provide extensive information about the objectives, risks, and costs of each of the many funds that they offer.

Types of Funds
You can invest in equity or fixed-income funds or even in a mixture, called balanced funds. Fund objectives range from short-term income (the most conservative) to aggressive growth. Index funds allow you to invest in a portfolio of stocks that mirrors the performance of a widely known index, such as the S&P 500 (Standard & Poor's) or the Dow Jones 30 Industrials. An Index fund gives you a slice of the stock market.

Mutual Fund Fees
Some, but not all funds charge a front-end load to purchase the shares. This commission amount, which varies up to 8 percent, comes directly out of the money you invest. In this case, less of your money is working for you. No-load funds do not charge an up-front commission, but they may (or may not) charge a periodic sales/distribution (12-b-1) fee or a fee for redeeming your fund when you need cash. Minimum initial-investment amounts for open-end funds vary from $250 or less for a retirement account (such as an IRA) to about $2,500 or less for an individual or joint account. Additional-investment minimums may be as low as $50. This makes mutual-fund investing a good candidate for dollar cost averaging, which is the process of making periodic purchases at different market prices.

Controlling the number of shares in a fund
Closed-end mutual funds have a fixed number of shares that may be bought and sold like a stock. If you want to purchase a closed-end fund, you will have to open a brokerage account and pay a brokerage commission. Closed-end funds are often specialized in, for example, municipal bonds of a certain state or a stock index.

UITs and REITs
Unit investment trusts (UITs) are similar to closed-end funds, but they have a fixed life after which your shares will be redeemed. Real estate investment trusts (REITs) specialize in ownership of mortgages or income-producing real estate, such as assisted-living facilities.

Be sure to do your homework before investing in mutual funds. Morningstar is an independent organization that evaluates and rates both open- and closed-end mutual funds, real estate investment trusts, and unit investment trusts. Extensive information about investing in mutual funds, REITs, and UITs is also available at the Motley Fool Web site.

Buying Individual Stocks
If there is a public company that you are familiar with and would like to share in their profits, then you can purchase stock in the company.  There are two main ways (other than a mutual fund) to purchase company stock: either from a broker or directly from the company.  For most individual investors, purchasing directly from the company is a less expensive option.

Buying Company Stock Directly
You can purchase stock directly from some companies. You can buy both whole and fractional shares, but most companies require you to buy at least one full share. Many companies also require a minimum initial investment (usually $500) that can be transferred directly from your checking account. A dividend reinvestment plan (DRIP) is similar to a share purchase plan, but they require you to first buy at least one share of stock through a broker and to have the stock registered in your name.

Share Purchase Plans and Dividend Reinvestment Plans
A good way to acquire shares of common stock in a specific company over time at a cost that is lower than brokerage commissions is to participate in a share purchase plan or dividend reinvestment plan (DRIP). If you still have investable funds available for long-term goals after contributing to your TSP—or if you simply must invest in a particular company—then you may want to consider these investment products.

Watch out for the fee
Some organizations allow you to buy one share-or even a fractional share-of most companies' stocks. However, you should consider the fee compared to the amount you are investing (for example, the per-purchase fee of $4 on a $100 investment equals a 4 percent front-end load). If you purchase just one share to qualify for a DRIP, the fee is not a major consideration. If you make a habit of purchasing shares through these organizations, however, your costs will chew up your returns.

Invest in More Automatically
Both share purchase plans and DRIPS allow any dividends on your stock to be reinvested in additional shares of stock (rather than to be paid out in cash). Under both plans, you can also acquire additional shares of stock during the year (called optional purchases). In many plans, you can also sign up for automatic transfers from your checking account to buy more shares of stock at regular monthly or quarterly intervals (called systematic purchases). These features allow you to compound your return on the stock without significant transaction costs. The periodic nature of share purchases and dividend reinvestment make these products perfect candidates for dollar cost averaging, which is the process of making periodic purchases at different market prices.

Not all companies have DRiPs
Every company is free to offer or not offer these plans. Companies that offer share purchase plans and DRIPs establish their own rules, including purchase minimums, timing of optional and systematic purchases, and the fees they charge. Small companies usually don't offer the plans, but you may be surprised.

So how do you find out if a company that you want to invest in has a share purchase plan or DRIP? Go to the company's Web site and click on "corporate information," "investor relations," "financial information," or "annual report."