There are four main investment types, or asset classes, that you can choose from, each with distinct characteristics, risks and benefits.
Once you are familiar with the different types of assets you can begin to think about piecing together a mix that would fit with your personal circ*mstances and risk tolerance.
Growth investments
These are more suitable for long term investors that are willing and able to withstand market ups and downs.
Shares
Shares are considered a growth investment as they can help grow the value of your original investment over the medium to long term.
If you own shares, you may also receive income from dividends, which are effectively a portion of a company’s profit paid out to its shareholders.
Of course, the value of shares may also fall below the price you pay for them. Prices can be volatile from day to day and shares are generally best suited to long term investors, who are comfortable withstanding these ups and downs.
Also known as equities, shares have historically delivered higher returns than other assets, shares are considered one of the riskiest types of investment.
Property
Property is also considered as a growth investment because the price of houses and other properties can rise substantially over a medium to long term period.
However, just like shares, property can also fall in value and carries the risk of losses.
It is possible to invest directly by buying a property but also indirectly, through a property investment fund.
Defensive investments
These are more focused on consistently generating income, rather than growth, and are considered lower risk than growth investments.
Cash
Cash investments include everyday bank accounts, high interest savings accounts and term deposits.
They typically carry the lowest potential returns of all the investment types.
While they offer no chance of capital growth, they can deliver regular income and can play an important role in protecting wealth and reducing risk in an investment portfolio.
Fixed interest
The best known type of fixed interest investments are bonds, which are essentially when governments or companies borrow money from investors and pay them a rate of interest in return.
Bonds are also considered as a defensive investment, because they generally offer lower potential returns and lower levels of risk than shares or property.
They can also be sold relatively quickly, like cash, although it’s important to note that they are not without the risk of capital losses.
FAQs
6 types of investments
- Stocks.
- Bonds.
- Mutual funds.
- Index funds.
- Exchange-traded funds (ETFs)
- Options.
TYPES OF INVESTMENT STRATEGY
- Growth investing. Growth investing focuses on selecting companies which are expected to grow at an above-average rate in the long term, even if the share price appears high. ...
- Value investing. ...
- Quality investing. ...
- Index investing. ...
- Buy and hold investing.
12 best investments right now
- High-yield savings accounts.
- Certificates of deposit (CDs)
- Money market funds.
- Government bonds.
- Corporate bonds.
- Mutual funds.
- Index funds.
- Exchange-traded funds (ETFs)
Here are the best low-risk investments in February 2023:
Series I savings bonds. Short-term certificates of deposit. Money market funds.
What are 3 main types of investment companies? ›
The three types of investment companies are mutual funds, closed-end funds, and unit investment trusts.
What are the 7 ways to invest? ›
Here's a summary of 7 smart investment options you can look into:
- Public Provident Fund (PPF)
- Fixed Deposits (FDs)
- Mutual Funds.
- Direct Equity.
- Government Schemes.
- Non-financial Assets.
- Life Insurance Plans.
7 types of investment plans: What's right for you?
- Stocks. Stocks represent ownership or shares in a company. ...
- Bonds. A bond is an investment where you lend money to a company, government, and other types of organization. ...
- Mutual Funds. ...
- Property. ...
- Money Market Funds. ...
- Retirement Plans. ...
- VUL insurance plans.
Historically, the three main asset classes have been equities (stocks), fixed income (bonds), and cash equivalent or money market instruments. Currently, most investment professionals include real estate, commodities, futures, other financial derivatives, and even cryptocurrencies in the asset class mix.
What is the #1 safest investment? ›
U.S. Treasury bonds are widely considered the safest investments on earth. Because the United States government has never defaulted on its debt, investors see U.S. Treasuries as highly secure investment vehicles.
What is the best investment for beginners? ›
The best investments for beginners
- 401(k) or employer retirement plan.
- A robo-advisor.
- Target-date mutual fund.
- Index funds.
- Exchange-traded funds (ETFs)
- Investment apps.
Some of the best types of investments for 2022 include high-yield savings accounts, government I-bonds and well-diversified ETFs. Investors who can afford more risk may also look into alternative investments like commodities and cryptocurrencies to boost their returns.
What is the most common investment strategy? ›
Buy and hold
A buy-and-hold strategy is a classic that's proven itself over and over. With this strategy you do exactly what the name suggests: you buy an investment and then hold it indefinitely. Ideally, you'll never sell the investment, but you should look to own it for at least 3 to 5 years.
What is the safest investment with highest return? ›
High-quality bonds and fixed indexed annuities are often considered the safest investments with the highest returns. However, there are many different types of bond funds and annuities, each with risks and rewards. For example, government bonds are generally more stable than corporate bonds based on past performance.
What investment returns the most? ›
The U.S. stock market has long been considered the source of the greatest returns for investors, outperforming all other types of investments including financial securities, real estate, commodities, and art collectibles over the past century.
What investments make money fast? ›
- How to invest $1,000 to make money fast.
- Play the stock market.
- Invest in a money-making course.
- Trade commodities.
- Trade cryptocurrencies.
- Use peer-to-peer lending.
- Trade options.
- Flip real estate contracts.
The Best Places to Save Money
- High Yield Savings Accounts.
- Certificates of Deposit.
- Traditional Savings Accounts.
- Money Market Accounts.
- Treasury Bills and Bonds.
- Retirement Savings Accounts.
While the product names and descriptions can often change, examples of high-risk investments include:
- Cryptoassets (also known as cryptos)
- Mini-bonds (sometimes called high interest return bonds)
- Land banking.
- Contracts for Difference (CFDs)
The highest risk investments are cryptocurrency, individual stocks, private companies, peer-to-peer lending, hedge funds and private equity funds. High-risk, volatile investments may bring high rewards, or they may bring high loss.
What are the top 3 investments? ›
7 Best Types of Investments in 2023
- High Yield Savings Accounts.
- Short-Term Certificates of Deposits.
- Short-Term Government Bonds Funds.
- S&P 500 Index Funds.
- Dividend Stock Funds.
- Real Estate & REITs.
- Cryptocurrency.
12 best investments right now
- High-yield savings accounts.
- Certificates of deposit (CDs)
- Money market funds.
- Government bonds.
- Corporate bonds.
- Mutual funds.
- Index funds.
- Exchange-traded funds (ETFs)
The best investments for beginners
- 401(k) or employer retirement plan.
- A robo-advisor.
- Target-date mutual fund.
- Index funds.
- Exchange-traded funds (ETFs)
- Investment apps.
The U.S. stock market has long been considered the source of the greatest returns for investors, outperforming all other types of investments including financial securities, real estate, commodities, and art collectibles over the past century.
What is the most common investment? ›
Perhaps the most common are stocks, bonds, real estate, and ETFs/mutual funds. Other types of investments to consider are real estate, CDs, annuities, cryptocurrencies, commodities, collectibles, and precious metals.
What are 3 low risk investments? ›
It's important to understand that while investing in low-risk assets can preserve your capital, it also limits your returns.
...
- U.S. Treasury Bills, Notes and Bonds. ...
- Series I Savings Bonds. ...
- Treasury Inflation-Protected Securities (TIPS) ...
- Fixed Annuities. ...
- High-Yield Savings Accounts.
High-quality bonds and fixed indexed annuities are often considered the safest investments with the highest returns. However, there are many different types of bond funds and annuities, each with risks and rewards. For example, government bonds are generally more stable than corporate bonds based on past performance.
Where I can start investing with little money? ›
4 easy ways start investing with little money
- Retirement plans for retirement goals. If your investing goal is retirement, you might already be invested if you're taking part in an employer-sponsored 401(k) plan. ...
- Low-cost brokerage accounts for (nonretirement) financial goals. ...
- Index funds and ETFs. ...
- Help from robo-advisors.
Rule 1: Start right now
No matter how small the amount, you'll see your money grow quickly. That's because of a really simple but important concept – compound interest.
