If you are short on ideas of what investment types it is possible to invest in, you have arrived at the right place.
In this list, we are going to include conventional types of investments like stocks, bonds, and cash equivalents. But we are also going to go over a lot of alternatives, which often offers a higher risk, but also potentially a higher reward.
Be sure to conduct a meeting with a financial advisor before making any investment decisions.
- Cash equivalents
- Real estate
- Peer-to-Peer lending
- Investment funds
- Real Estate Investment Trust
- Website investing
Stocks, also often referred to as equities, are probably the first type of investments that comes to mind when you think about different investment types.
A stock represents a share of ownership in public traded company.
Stocks are a very popular investment choice as they historically have outperformed other investment types in the long run.
They have big price fluctuations, which makes them more suitable for long-term investors, as they will have the time to hold on to the stock even if it underperforms.
There are two types of stocks you can buy:
You can buy common stocks in all publicly traded companies. Common stocks are typically the type of stocks investors buy.
Preferred stocks differ a bit from common stock, as companies don’t necessarily issue these on the stock exchange at all.
With preferred stocks, the risk of losing money is lower than with common stocks, and as a consequence, the return is also lower.
A bond is like a loan issued by a company, government or a similar organization.
Investors lend the organizations money for a defined time period. In that period, they will then pay the investor a certain interest rate – called a coupon.
Bonds come with different levels of risk and just like with lending money to normal people, whom you lend money to defines your risk.
It’s possible to sell bonds, but the price the investor can get will go up and down until the bond mature.
Bonds are very popular among investors, as they offer more stability than stocks. Furthermore, the investor will receive coupon payments throughout the period of holding the asset.
Even though bonds can be a great asset in an investment portfolio, they tend to underperform when interest rates are low.
3. Cash equivalents
Cash equivalent investments give you easy access to your money while protecting your original investment.
These investment types are best suited when you need access to your money within a short period of time
Examples of cash equivalents include:
A savings account is a type of bank account that allows you to store money you don’t need right. Savings accounts typically earn a yearly return of around 0-2%.
Money market accounts
Money market accounts, or MMAs, comes with higher interest rates than normal savings accounts.
But often times a much higher minimum deposit and balance is also required.
Certificate of deposit
A certificate of deposit, or CD, holds your money for an agreed time period.
Compared to other types of cash equivalents, a CD usually offers higher interest rates. And the longer the term of the CD, the higher the interest rate.
Withdrawing money from a CD before the end of the term results in a penalty.
Therefore, you should only open a CD with money you don’t need right away.
Commodities counts for physical goods such as gold, silver, wheat, electricity, corn and natural gas.
Unlike stocks and bonds, commodities do not pay any dividends or coupons.
Instead, the financial advantage of owning these investment types is due to price movements.
The prices of commodities tend to have a low correlation to other assets such as stock and bonds.
This means that when stock prices are rising, the commodities as gold will often fall in prices, and vice versa.
Therefore, commodities are worth considering having in a well-diversified investment portfolio.
5. Real estate
Real estate investing is one of the more classic investment types on this list.
The return from investing in real estate can come from rental income and for increases in the value of the property.
Investing in real estate helps investors protecting their purchasing power, as properties, in general, follow inflation.
Cryptocurrencies are in many ways like conventional currency – called fiat money. They can both used to transfer value, but there are some key differences.
Due to the fact, that cryptocurrencies, like Bitcoin, are made by decentralized technology, makes it possible for investors to know the supply of the market.
So opposed to fiat money, the supply and rate of inflation are very predictable.
This makes it possible for investors to know the supply and demand in a manner that is not possible with fiat money.
As most currencies fall victim to inflation, some cryptocurrency can be a good hedge in an investment portfolio.
However, as of now, cryptocurrency is quite volatile, with big price moves. This makes the possible risk, but also reward level, massive.
If you are interested in learning more about investing in cryptocurrencies, make sure to check out our beginners guide to cryptocurrency investing.
7. Peer-to-Peer lending
If you are looking for new investment types, Peer-to-Peer lending, or P2P lending for short, might be something for you.
P2P lending allows private investors to collectively fund loans to private borrowers.
According to the number of times it’s searched on Google, it is clear that P2P Lending has become increasingly popular over the last decade.
If you are interested in learning more about this amazing investment type, you can check out our review of the P2P lending platform Mintos.
There are a tremendous amount of currencies in the world, but most of your money is probably only in one currency.
So if your currency fails, most of your assets will be at risk.
Therefore, having at least some exposure to a foreign currency can be very helpful.
That way you can spread your risk more globally.
Options are a type of derivative, as the option itself is not the primary asset.
An option is a contract that offers the buyer the right to buy or sell an underlying asset. This could, for example, be shares of The Coca-Cola Company.
Options can be used within agreed-upon time periods. However, the option buyer is not obligated to use the option.
On the flip side of the trade, the seller of an option earns a premium by writing the option.
The investment type is used by more advanced traders and is not recommended for beginners.
In practice, options can work as a way to lower the downside risk of an investment portfolio during times of financial turbulence.
10. Investment funds
Investment funds allow investors to collectively invest them according to a predefined investment strategy.
A mutual fund is managed by professional fund managers, that act according to the defined strategy stated in the individual fund’s prospectus.
An index fund is a type of mutual fund that aims to track the components of a market index like the S&P 500.
They are typically cost-efficient, as they are passively managed to just follow the indexes. Hence they have a return that nearly the same as the overall market’s return.
Exchanged-traded funds, popularly known as ETFs, is an investment fund that is publicly traded on stock exchanges in a similar way that stocks are traded.
11. Real Estate Investment Trust
A real estate investment trust, or REIT for short, is a company that manages income-producing real estate.
To be qualified as a REIT, a company will have to comply with a series of requirements.
One of these requirements includes being obligated to pay out a minimum of 90% of the income to the shareholders.
A clear benefit of investing in REITs instead of traditional real estate investing is that the REIT market provides more liquidity. This means that if you want to sell your asset, it can easily be done through an exchange like with normal securities.
On the flip side, traditional real estate investors take comparably longer time to sell their properties.
Investing in REITs can offer some of the benefits that investing in traditional real estate does. However, the investment doesn’t require investors to actively manage the properties themselves.
An annuity is a financial product that is designed to pay out a steady amount of cash over time.
Typically, they are used to ensure a regular income upon retirement.
Annuities are a contract between you and a financial institution. They will give you a monthly payment of an agreed-upon time period in retirement.
13. Website investing
Since the beginning of the internet, investing in web property has become increasingly profitable, as has become easier to monetize websites over time.
However, the competition has also risen a tremendous amount.
But if you are a tech-savvy, website investing can definitely be for you.
Futures are is a type of contract that binds the buyer and seller to a trade a security in the future at an agreed-upon price.
They are commonly used to protect producers and suppliers from price changes in the dairy industry.
Like options, futures should be avoided without proper education, as they are one of the investment types that provides high risk to uneducated investors.
Treasury Inflation-Protected Securities, or TIPS, is an investment type that strictly provides protection against inflation and deflation.
They offer very little risk, but also nearly no reward for binding up your money.
Tips can be used as a way of diversifying investment portfolios.
Typically people only consider TIPS when being close to retirement or to hedge their money in periods of high inflation or deflation.
You can buy TIPS through a broker.
To learn more about TIPS, visit the treasurydirect.gov.
Collectibles is a type of investment where the price increase or decrease due to the supply and demand of a product.
It’s hard to predict which collectibles will increase in price over time, as you will have to be able to both predict the supply of a given product, as well as what the demand and popularity will be for it in the future.
However, some people still make a lot of money on collectible investments in things like wine, watches, classic cars, art, and even sneakers.