If you’re exploring ways to grow your money, the number of investment options can feel overwhelming at first. Some are simple and steady, others offer higher growth but fluctuate in value more, and a few sit somewhere in between.
It helps to understand each type of investment, how it works, what they can offer, and what risks come with them. No investment is ever completely risk-free, and nothing here is personal financial advice, just general guidance to help you get familiar with the basics.
What Are Common Types of Investments?
1. Stocks (Shares)
Buying shares means owning a small part of a company. When the company performs well, your investment may increase in value. When it doesn’t, the value can fall.
People often choose stocks because they offer:
- The potential for higher long-term returns
- Flexibility to buy or sell
- A way to invest in companies they believe in
Shares fluctuate in value, so they won’t suit short-term goals or money you need to keep stable. Even though they can offer higher long-term growth than less risky assets, nothing is guaranteed.
2. Bonds
Bonds are usually seen as safer than stocks but usually come with lower returns. When you buy a bond, you’re lending money to a government or a company, and they pay you interest in return, most offering a fixed interest rate. Most Bonds are therefore designed to provide a predictable level of income.
Whilst the price of a bond can still rise and fall in value during the life of the bond, so are not completely without risk, they do tend to move less than stocks.
Bond prices can be sensitive to market interest rates or if the issuer defaults on their interest payments. This is called credit risk.
For most bonds there is a full repayment of your capital investment. Common types include:
- Corporate bonds
- Government bonds
- Index-linked bonds
You may also hear about products like a Guaranteed Investment Bond. These are investment bonds, usually classed as a single premium life insurance policy and should be thought of as an investment product and these offer a fixed interest rate for a fixed term.
3. Funds
Funds group together lots of investments so you don’t have to choose individual companies or assets. This spreads your risk and can help smooth out some ups and downs.
Main types include:
- Index funds
- Mutual funds
- ETFs
Although funds are diversified, they can still fall in value, especially over short periods, so you may get back less than you put in.
4. Property
Property can be a long-term way to build wealth, and it’s often appealing because it feels solid and familiar.
There are several ways people invest in property:
- Buying a home to benefit from rising value
- Purchasing a buy-to-let property for rental income and capital gain
- Using property funds or Real Estate Investment Trusts (REITs)
- Renovating and selling
Property can grow well over time, but it comes with costs and responsibilities. Values can also fall, so it’s not guaranteed.
5. Cash-Based Options
Cash products aren’t “investments” in the traditional sense, but they’re still part of many people’s money plans. They offer more predictability, which is useful for short-term goals or emergency savings.
Common examples:
- Fixed-term savings accounts
- Cash ISAs
- Notice accounts
These are usually covered by the Financial Services Compensation Scheme (FSCS) up to £120,000 per authorised bank (previously £85,000), per person, but that protection applies to cash, not investment performance. Cash products are stable, though their returns may not keep up with rising inflation.
6. Commodities
Commodities include oil, gold, gas, and agricultural goods, and their prices can move sharply due to global events, supply issues, and market sentiment.
People usually invest through:
- Exchange Traded Funds (ETFs)
- Futures contracts
- Commodity-focused funds
Commodities can swing widely in price, so they’re better suited to investors who understand how volatile they can be.
7. Cryptocurrency
Cryptocurrency has become increasingly popular, especially among younger investors, but it’s one of the highest-risk areas so serious consideration should be given to whether they are suitable. Prices can rise rapidly and fall just as quickly.
You can gain exposure through:
- Buying coins directly
- Crypto investment platforms
- Crypto-linked ETFs (where available)
Crypto isn’t protected by the FSCS, and platforms can fail, so only a small portion of a well-diversified portfolio (if any) should be allocated here.
Choosing What Fits You Best
Finding the right investment depends on:
- How long you want to invest
- How comfortable you are with the ups and downs
- Whether you need access to the money
- Your long-term goals
Most people use a mix of investments and cash so they’re not relying on a single type. A blend offers balance and helps reduce the impact of sudden market swings.
Final Thoughts
Essentially, there’s no universal “best” investment. Each type has its own behaviour, purpose, and level of uncertainty. The aim is to understand the basics so you can make choices that fit your comfort level and long-term plans.
And remember, this is general information, not personalised advice. If you’re unsure about a specific product or want guidance for your individual situation, it’s always worth speaking to a regulated financial adviser (visit unbiased.co.uk).
