Investing 101 11 Types of Investments: What They Are & How They Work Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint Published Oct 6, 2021 - [Updated Dec 21, 2021] 8 min read Sources Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. If you want to get ahead in life without spending every waking minute at work, investing your money is a smart move. Investments can provide a steady income that helps build your savings or retirement account, and there are lots of ways to go about it. If you plan on investing, understanding your different types of investments and the pros and cons of each option is important. Choosing the right type of investment for your financial situation is crucial because some investments carry more risk than others. That said, those same investments typically offer a greater return when things go well—but it’s up to you to figure out which investments are right for you. To help you navigate this new chapter and find investments that are a good fit for your circumstances, we’ve created this guide. Find out more about some of the most common types of investments and how you can start investing today. Use the links below to go straight to a specific investment you’ve been wanting to learn about. What Types of Investments Are there? Stocks Bonds Certificates of Deposit (CDs) Mutual Funds Exchange-Traded Funds (ETFs) Options Annuities Commodities Cryptocurrencies Precious Metals What Are the Best Types of Investments for Beginners? How to Start Investing What Types of Investments Are There? There are many different investment options that you can choose to put your money into, but they’re not all created equal and some may be better suited for different types of investors. Here are 11 of the most common types of investments and why you should consider prioritizing them: Stocks Stocks are one of the most common investment types—according to a Gallup poll, 56% of Americans reported that they own stock in 2021. That’s because it’s fairly easy to get started and you don’t have to risk a fortune, but what is a stock? A stock that allows you to invest in a company, which can earn you money in the form of appreciation or dividends. If you’re going to invest in stocks, make sure you diversify your portfolio by investing in several companies. That way, your investment doesn’t depend on the success of a single company. Bonds A bond is essentially a loan you can offer to governments and corporations, which allows you to earn money from interest paid on the loan. Savings bonds are a low-risk, low-return investment and can be a vital part of your investment portfolio. Governments and corporations need loans to complete large projects, whether that’s the construction of a new building, a new road or a school. In order to fund these projects, organizations rely on bonds from investors, which all combine to fund large projects. Municipal bonds are bonds that are issued directly by the state or local government. Certificates of Deposit (CDs) If you’re looking for a way to add a slow, steady stream of income, certificates of deposit (CDs) might be a good option. With a CD, a bank agrees to pay a higher interest rate if you agree to leave a predetermined amount of money in a bank account untouched for a certain amount of time. CDs are well suited for those who are looking for low-risk investments, but it’s best to combine them with different types of investments for a diversified portfolio. It’s also important to note that CD interest rates are typically higher at credit unions and local banks, so try to avoid larger national banks. Mutual Funds One way to make it easier to get started and track your investments is to invest in a mutual fund. A mutual fund combines money from several individual investors and uses it to invest in stocks, bonds, and short-term debt. Instead of having to build your own investment portfolio, mutual funds decide how to invest and establish a portfolio for you. By investing in shares of a mutual fund, you have part ownership of the income generated. If you’re looking for relatively safe types of investments, choose a mutual fund that has a history of stability rather than volatility. Exchange-Traded Funds (ETFs) What is an ETF? An exchange-traded fund (ETF) is a type of investment that tracks a certain industry, commodity, or another asset, but can be purchased and sold on the stock exchange. There are several options when it comes to this type of investment, including: Stock ETFs Bond ETFs Industry ETFs Commodity ETFs Currency ETFs Inverse ETFs. Some examples of ETFs include the SPDR Dow Jones Industrial Average (DIA) and the SPDR S&P 500 (SPY). ETFs are a good way to invest in stocks across various industries, which helps reduce your investment risk by diversifying your portfolio. Options Options are a bit different than the other types of investments we’ve discussed. An option is essentially a contract that gives the purchaser the right to buy or sell underlying assets at a set price. Your contract will include an expiration date by which you must exercise your option if you choose to do so. Options allow you to invest in important natural resources like oil without having to spend a fortune. While there are several opportunities to profit through investing in options, they’re one of the more complex investments, so it’s usually best to talk with an expert before investing in options. Annuities An annuity is an investment opportunity offered by insurance companies that allows you to make contributions in return for periodic payments in the future. Annuities start with the contribution period, during which you (the investor) make several small payments or one lump-sum payment to fund your annuity. Once your fund has been annuitized, you will begin receiving periodic payments. You can choose to have this amount paid out over a fixed period of time or for the remainder of your lifetime. Commodities Commodities are the resources people use in everyday life, from precious metals and food to natural gas and oil. As an investor, you can diversify your portfolio and reduce risks by investing in commodities, and there are more ways to do that than ever. You can invest in commodities through stocks, exchange-traded funds, exchange-traded notes, mutual and index funds, and commodity pools and managed futures. If you want to broaden your investment portfolio, commodities are great. Cryptocurrencies Cryptocurrencies such as Bitcoin and Etherium are becoming increasingly popular investment options. The idea is that these currencies increase in value due to a limited supply, so for example, your purchase of $1,000 may be worth $2,000 in the future. There are several services that allow you to buy and sell cryptocurrencies for a small fee. While this can be a lucrative investment, it’s also one of the riskiest investments you can make. Precious Metals From silver and gold to platinum and palladium, all these precious metals can be turned into investment opportunities. These precious metals will always be in limited supply, and they’re constantly being used for electronics, jewelry, and more. You can buy raw precious metals such as gold, silver and palladium and hold onto them, selling them when they increase in price. Because there is a fixed supply and high demand for these metals, they tend to steadily increase in price. If you do invest in precious metals, make sure you have a safe place to store them. What Are the Best Types of Investments for Beginners? If you’re just getting started with investing, it’s usually recommended that you avoid high-risk or complex investments. As a beginner, you should generally stick to low-risk, low-yield investments such as CDs until you gain a better understanding of how investments work and what your risk tolerance is. Once you’ve built a small portfolio, you can invest in mutual funds and ETFs, or you can start learning about investing in stocks and give that a try. You have plenty of time to learn, so make sure you start out small and more convservative when it comes to investments. The key is to learn the fundamentals before you start making major moves. How to Start Investing There’s no time like the present to start investing, however, for a lot of people, getting started is the hardest part. Here are a few easy steps you can follow to get started on the right foot: Decide on a monthly investment budget. Learn about the different types of investments and their risks. Set goals and choose the types of investments that fit them. Figure out how you’ll start investing. Monitor your investments regularly. You can talk to a financial advisor at your bank and ask about a CD or high-yield savings account. Your bank may even offer investment services beyond basic savings accounts. Alternatively, you can work with an investment firm to find a financial planner who can help you figure out the best investments for you. There are also several apps and services that allow you to invest as well, including stock trading apps, cryptocurrency apps, and more. This is a good way to try investing without spending too much time or money. Choose an Investment & Get Started No matter how you choose to invest, getting started now rather than later is of the utmost importance. The sooner you start investing, the more time you’ll have to build a robust portfolio and plan for the future. From stocks and bonds, to cryptocurrencies and precious metals, there are lots of ways to invest your money. Start investing today and use the Mint app to monitor your investments, so you can make the best decisions for a brighter future. Previous Post Money Market vs. CD: Which Is Right for You? Next Post 30 Investment Terms to Know Before Investing Written by Mint Mint is passionate about helping you to achieve financial goals through education and with powerful tools, personalized insights, and much more. More from Mint Sources Gallup Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! Retirement 101 5 Things the SECURE 2.0 Act changes about retirement Home Buying 101 What Are Homeowners Association (HOA) Fees and What Do … Financial Planning What Are Tax Deductions and Credits? 20 Ways To Save on… Financial Planning What Is Income Tax and How Is It Calculated? Investing 101 The 15 Best Investments for 2023 Investing 101 How To Buy Stocks: A Beginner’s Guide Investing 101 What Is Real Estate Wholesaling? Life What Is A Brushing Scam? 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