15 Types of Investments (and the Best One for Beginners)

There’s a myth that investing is only for the wealthy or the financial wizards.

But the reality is: anyone with a little money and a bit of curiosity can start building wealth.

With so many investment types, it’s normal to feel overwhelmed. It’s easy to wonder, “Which types of investments are actually right for me?” or “What’s the best way to grow my money?”

If you’ve ever felt out of the loop, you’re in the right place. Let’s explore 15 types of investments that can help you reach your financial goals.

Knowing Your Investment Options

Investing is a way to put your money to work and earn returns, helping you achieve your financial goals.

Wise investors know not to blindly put all their eggs in one basket. Instead, they become familiar with a few different investment types. They use their knowledge of each one to make money in different ways.

When it comes to investing, there are a lot of baskets to choose from.

BUT, it's important to understand all your options before you actually invest your money and start to build your portfolio.

Every type of investment has its upside and downside.

The best types of investments to make depend on your level of understanding of certain markets. It is also best to know the timeline to avoid capital gains and set clear investment objectives.

Among the different types of investments out there, there are probably a few that will work well for you.

Cash and Commodities

Cash and commodities are typically considered low-risk types of investments. One of these options could be a good place to start.

1. Gold

Gold is a classic example of a commodity investment. People often see it as a “safe haven” during times of market volatility.

But here’s the thing: gold’s value is driven by scarcity and fear, not by the fundamentals that drive most businesses.

If you are investing in gold, be aware that your “moat” (protection against a price drop), is based on external factors. The price can fluctuate a lot, and quickly.

If you think the world is going to be a more fearful place in the future, then gold could be a good investment for you.

💡Key Takeaway: Betting on commodities such as gold is usually just that, betting. It's not Rule #1 Investing unless you KNOW that scarcity is going to create a demand for gold and drive up the price.

2. Bank Products and CDs

Bank products are some of the safest places to park your cash. Think high yield savings accounts, money market accounts, and money market funds. They’re insured by financial institutions and pay interest. Although usually at a fixed interest rate lower than inflation.

A CD, or certificate of deposit, is another type of bank product. It offers slightly higher interest payments if you’re willing to lock up your money for a set period. But these are not investment accounts designed for long-term growth. The returns are low, and your money may lose buying power over time due to inflation. Most banks offer CDs at a return of less than 2% per year.

💡Key Takeaway: CD is a safe place to save your money, but it's not good for building wealth.

3. Cryptocurrency

Cryptocurrencies, such as Bitcoin or Ethereum, have gained a lot of interest in recent years as an investment vehicle. It’s exciting, sure, but it’s also highly speculative. Crypto prices can skyrocket (or plummet) overnight. There’s no fixed income, and regulation is still catching up.

How to Invest in Bitcoin

Though cryptocurrencies aren't technically part of the Forex market, the mechanics of investing in cryptocurrencies are very similar. You can exchange dollars for crypto. The hope of many cryptocurrency investors is that the value of those cryptocurrencies goes up against the dollar. They are then relatively simple to buy online.

💡Key Takeaway: Unless you truly understand the risks and mechanics of digital assets, cryptocurrency is more of a gamble than an investment. Investing involves risk, and crypto is at the high end of that spectrum.

Bond Funds and Securities

Bonds and securities are other investments types that are low risk.

Bonds can be purchased from the US government, state and city governments, or from individual companies.

Fixed income securities are investments issued by an agency of the U.S. government, but can also be issued by a private firm.

4. U.S. Savings Bonds & Corporate Bonds

Bonds are a classic fixed income security. When you buy a U.S. savings bond or corporate bond, you’re lending money to a government or business in exchange for interest payments.

But here’s the catch: interest rates on bonds are usually low. If inflation outpaces your returns, you could actually lose money in real terms.

Governments issue bonds to raise money for projects and operations, and the same is true for corporations that issue bonds.

Corporate bonds are slightly more risky than government bonds because there's more risk of a corporation defaulting on the loan. Purchasing a corporate bond does not give you any ownership in that company.

An important note to remember is that a bond may only net you a 3% return on your money over multiple years.

💡Key Takeaway: Bonds can help balance a diversified portfolio, but don’t expect big capital gains.

5. Mortgage-Backed Securities

Unlike other bonds, which pay the principal at the end of the bond term, mortgage-backed securities pay out interest and principal to investors monthly.

💡Key Takeaway: Mortgage-backed securities are one of the more complex investment types, and so should be avoided by beginner investors.

Actively Managed Funds

Actively managed funds, like investment funds, are a pool of money collected from multiple investors. These are then invested in many different things, including stocks, bonds, and other assets.

6. Mutual Funds

Mutual funds pool money from retail investors and invest in a mix of stocks, bonds, or other assets. The manager of a mutual fund invests actively by buying and selling, hoping to beat a particular market index. However, mutual funds often come with high fees, and most don’t outperform the stock market over the long term.

Rule #1 Investors expect a minimum annual compounded rate of return of 15% a year or more. If we can get that, we don't care what the market did because we're going to retire rich anyway.

💡Key Takeaway: You'll have a much easier time (and more fun!) learning your own money rather than relying on some mutual fund manager who can't beat the market.

7. Index Funds

Index funds, unlike mutual funds, are passively managed and not directly overseen by a money manager. These track market indices, like the S&P 500 or Dow Jones Industrial Average. They offer lower fees than mutual funds and typically perform as well as the market index they follow. For many, index funds are among the best investments for beginners. They’re simple, low-cost, and historically reliable.

When you invest in an index, you're essentially betting your money on the future of America. If you're confident the American economy will keep growing, you're probably going to come out ok.

The problem here is that if you put your money in an index and we enter a recession, the market could be down for a significant amount of time. That's another plus of investing in wonderful companies. The really great ones tend to perform, even in times of recession.

💡Key Takeaway: If you don't want to do the work (and reap the rewards) of learning to invest in individual companies, an index fund is a good “put your money in and forget about it” option that will typically generate better results than a mutual fund.

8. Exchange-Traded Funds

Exchange-traded funds (ETFs) work like index funds but can be traded on the stock market throughout the day. Many ETFs track a market index, while others focus on specific sectors or investment strategies. ETFs usually have lower fees than actively managed funds, and you can buy or sell them easily with an online brokerage account.

You can minimize your risk by investing in an ETF that tracks a broad index, such as the S&P 500.

💡Key Takeaway: Aside from investing in individual companies, an ETF is probably the best option available to beginner investors.

The Stock Market

There are a number of ways to invest in the stock market. As mentioned above, you could invest in a stock market index, or you could invest using stock options. You could invest in individual stocks as well (my personal favorite).

9. Individual Stocks

Buying individual stocks means owning a share of a company. When the company grows, so does your investment. You might also receive stock dividends as a reward. However, when the price of a company's stock goes down, the value of the owner's investment goes down.

You can minimize your risk by investing in only wonderful companies at prices that guarantee a big return. That is the Rule #1 way.

💡Key Takeaway: Among the many things to invest in, stocks are my personal favorite and by far the most rewarding. With the right research and patience, investing in individual stocks can offer higher returns than most other investments.

10. Stock Options

Stock options give you the right to buy or sell a stock at a set price within a specific time. However, it can be incredibly risky. As with most high-risk types of investments, there is potential for high returns. Unfortunately, there is also the potential for great loss, especially if you don't know what you're doing. Knowing your risk tolerance and having alternative investments can save you from this.

Put Options

With a PUT option, you're agreeing to SELL a stock when it gets to a certain price at a specific time.

PUT options can be thought of like insurance policies. You get them at a set price. Then, for a certain period of time, you can sell the stock at a guaranteed price. This is regardless of the stock's price on the market. Investors generally buy PUTS when they are concerned that the market will fall.

Call Options

CALL options have a market price, referred to as a premium. You pay the premium of the call option to secure the contract to buy the underlying stock.

Investing in CALL options is a fantastic way to generate cash flow and reduce basis on companies we already own.

💡Key Takeaway: Options are best left to experienced investors. If you’re just starting, focus on simpler investment options.

Retirement Plans

There are two major types of retirement accounts: a 401K and an IRA. Both accounts are made up of cash you put aside and then invest in various ways.

11. 401k

A401k is a retirement account offered by your employer. The best part? Many employers match your contributions, which is basically free money.

The Big Problem with 401ks

All of the money invested in a 401(k) ends up in mutual funds. The problem is that these mutual funds almost always fail to outperform the market average.

Mutual funds fail to outperform the market because the managers of these funds charge a considerable fee for their services. Once this fee is deducted, any returns that the manager was able to yield beyond the overall market's performance are gone.

Remember, diversifying your investment portfolio does not inherently mean that you are lowering your potential for risk.

💡Key Takeaway: Use your 401(k) for the employer match, but diversify your retirement plan with other investment options.

12. IRA

An IRA is an individual retirement account you can set up for yourself. In terms of IRAs, there are traditional IRAs (tax-deferred) and Roth IRAs (tax-free).

Yes, you read that correctly. A Roth IRA is tax-free!

The money you invest in a Roth IRA is taxed before it is invested. When you take it out during retirement, you aren't taxed on the income from your investments. You can freely invest in stocks, bonds, mutual funds, ETFs, and more

Key Takeaway: Max out your Roth IRA if possible. It’s one of the best investments for long-term, tax-free growth

13. Annuities

Annuities are contracts with insurance companies where you pay a lump sum in exchange for regular payments, often during retirement. They provide stability but little chance for capital appreciation.

💡Key Takeaway: Annuities are low risk, but they won’t grow your money much. Consider them for guaranteed income, not wealth-building.

Real Estate

There are a variety of ways to invest in real estate. The main drawback for most beginning investors is that the price of entry is high.

14. Property

Real estate investing can offer both capital appreciation and steady rental income. But it requires a big upfront investment, ongoing management, and sometimes dealing with tenants. New options, like crowd-funded real estate investment opportunities, make it easier for retail investors to get started with less money.

The hardest part about investing in real estate is finding a property that you can purchase with a margin of safety. If you can do that, you can make some decent returns investing in property.

You can make money by buying the property at a below-market rate and selling it at full price, as well as by renting or leasing the property to tenants.

💡Key Takeaway: Real estate can be rewarding, but it’s not as liquid or simple as investing in the stock market.

15. Real Estate Investment Trust

A Real Estate Investment Trust, or REIT, lets you invest in real estate without owning property directly.

Plus, REITs can be bought and sold like stocks on the stock market. They can be cheaper and easier to invest in than property.

💡Key Takeaway: REITs are an accessible, lower-risk way to invest in real estate and receive interest payments or dividends.

What Are the Worst Types of Investments for Beginners?

Not everything that costs money is an investment.

Fancy cars, boats, or expensive gadgets? These are money traps that lose value over time. It's a bad investment. Even leaving large sums in a savings account can hurt your financial goals due to inflation and low interest rates.

While fancy material things may help you keep up with the Jones' on your block, the benefit is ultra temporary. It's so important to live within your means and spend your money wisely so you can afford the life you want in the future.

Pro Tip: If it doesn’t help you grow your wealth, think twice before calling it an investment.

What Are Good Investment Strategies for Beginners?

Start with what you understand and what matches your risk tolerance. Index funds, ETFs, and individual stocks (if you do your homework) are some of the best investments for those new to personal finance. Remember, investing isn’t about chasing the highest returns. It’s about building a diversified portfolio that fits your financial goals and timeline.

I believe in investing in wonderful businesses at great prices, and I'm here to help you learn how. Join my investing workshop to learn how to confidently choose your best investments and build long-term wealth.

Frequently Asked Questions About Investment Types

What are the safest types of investments for beginners?

High yield savings accounts, CDs, and U.S. savings bonds are generally the safest. They offer low risk but also lower returns.

How do I choose the right investment type for my goals?

Match your investment choices to your risk tolerance and timeline. For long-term growth, consider index funds or ETFs. For stability, look at bonds or money market accounts.

What’s the difference between mutual funds and ETFs?

Both pool money into diversified portfolios, but ETFs trade like stocks throughout the day, while mutual funds trade once daily.

Can I lose money investing in the stock market?

Yes, investing involves risk and market volatility. Your investments can go up or down in value.

What are alternative investments?

Alternatives include assets like REITs, gold, or crypto. They can diversify your portfolio, but often come with higher risk.

How do I start investing with a small amount of money?

Many online brokerage accounts let you start with $100 or less. Consider low-fee index funds, ETFs, or fractional shares.

Do I need an investment advisor to get started?

Not necessarily. There are some that use advisory or brokerage services. Many beginners use online resources or robo-advisors. A certified financial planner can help if you want personalized investment advice. With the right framework and good understanding, you can be your very own investment advisor.

Investment Types: Empowering Beginner Investors

Investing can feel intimidating, but it’s for anyone willing to learn. Every investment type involves some risk. But with knowledge, a clear strategy, and a bit of patience, you can turn those risks into rewards. If you’re ready to take control of your financial future, we’re here to support you every step of the way.