Beginner’s Guide to What You Can Invest In

Investing is about putting your money to work to build wealth over time. Explore different investment options, understand their risks and potential returns, and learn how to make more informed decisions for your financial future.

This guide is in three parts…

• 1. Investing in Physical Assets
• 2. Investing in Non-Physical Assets
• 3. Investing in Complex and Speculative Assets

Investing is one way to build wealth over time. Rather than relying entirely on the income you earn from working, you can put money into assets that have the potential to grow in value, generate income, or both.

But what can you actually invest in?

The options extend far beyond stocks and shares. You can invest in businesses, lend money to governments and companies, own property, buy precious metals, hold cash-generating assets and gain exposure to markets around the world. You can also invest indirectly through funds that bundle many different assets together.

Some investments are relatively straightforward to understand. Others are complex, speculative or difficult to sell. Each comes with its own potential rewards, risks and costs.

This guide explores the main types of investment assets, how they work and what to consider before investing. The aim isn’t to suggest that you need to own everything, but to help you understand the choices available and make more informed decisions about building wealth over the long term.

What Is an Investment Asset?

An investment asset is something you own, or have a financial interest in, with the expectation that it will provide a financial benefit in the future.

That benefit might come from an increase in its value, income it generates, or a combination of the two.

For example:

• Shares can increase in value and pay dividends.
• Bonds can pay interest and return their principal at maturity, subject to the issuer meeting its obligations.
• Property can generate rental income and potentially appreciate in value.
• A business can produce profits and become more valuable.
• Gold can increase in price, although it doesn’t generate income by itself.

Not every asset generates income, and not every investment increases in value. You can lose money, sometimes permanently. The return you receive depends on the asset, the price you pay, the costs involved and what happens after you invest.

It is also important to distinguish investing from saving. Savings accounts and cash deposits can play an important role in protecting money and meeting short-term needs, while investments generally involve accepting some degree of risk in pursuit of future returns.

Two Broad Categories: Physical and Non-Physical Assets

One useful way to explore the investment landscape is to divide it into physical assets and non-physical assets.

Physical assets are tangible things that exist in the real world, such as property, land, gold and other commodities.

Non-physical assets include financial securities, contractual claims and ownership interests that don’t require you to possess a physical object. Shares, bonds and fund units fall into this category.

This distinction isn’t absolute. A property fund, for example, gives you financial exposure to real estate without requiring you to own or manage a building directly.

Let’s explore both groups.

Part One: Investing in Physical Assets

1. Property and Real Estate

Property is one of the most familiar forms of investing. It can offer the potential for rental income, long-term appreciation or both.

Common approaches include:

Residential property: Buying houses or flats to rent to tenants, or purchasing property with the expectation that its value will increase.

Commercial property: Investing in offices, shops, warehouses, industrial units or other premises used by businesses.

Land: Buying land with the expectation that its value will rise, potentially because of development, changes in local demand or other factors.

Property development: Purchasing land or buildings to renovate, improve or develop before selling or renting them. This is often an active business as much as an investment.

Direct property ownership can involve substantial upfront capital, borrowing costs, maintenance, insurance, taxes, vacancies and legal responsibilities. Property is also relatively illiquid: selling it can take time and incur significant costs.

You don’t necessarily need to buy a building to invest in property. Listed real estate investment trusts (REITs) and property funds can provide exposure to real estate through financial markets, although their prices and risks differ from those of direct property ownership.

2. Precious Metals

Precious metals have been used as stores of value and traded for centuries.

Gold is the best-known example. Some investors hold it as a potential diversifier or as protection against certain economic and geopolitical risks.

Silver has both investment and industrial uses, which can influence its price.

Platinum and palladium are used in various industrial applications and can be affected by changes in manufacturing demand and supply.

You can gain exposure to precious metals by buying physical bullion or coins, investing through certain funds or purchasing shares in mining companies.

The distinction matters. Physical gold is not the same investment as a gold-mining company, whose performance also depends on its costs, management, financing and operations.

Precious metals generally don’t produce interest, rent or dividends. Your return depends largely on the price at which you can sell, after accounting for storage, insurance, dealing costs and any applicable taxes.

3. Other Commodities

Commodities are basic materials and agricultural products that are traded in markets around the world.

Examples include:

• Energy: Crude oil, natural gas and certain refined products.
• Industrial metals: Copper, aluminium, nickel and other metals.
• Agricultural products: Wheat, corn, coffee, sugar and soybeans.
• Livestock: Cattle and other products traded in agricultural markets.

Commodity prices can be affected by supply and demand, weather, geopolitical events, transport costs, industrial activity and changes in production.

Investors may obtain exposure through specialist funds, commodity-linked financial products or derivatives such as futures contracts. Direct ownership and storage may be possible for some commodities, but it isn’t practical for many others.

Commodities can be volatile and may not be suitable as a core holding for every long-term investor. Some commodity funds use futures contracts, whose returns can differ significantly from movements in the spot price of the underlying commodity.

4. Collectibles and Other Tangible Assets

Some people invest in assets such as:

• Fine art and sculptures.
• Rare coins and stamps.
• Classic cars and motorcycles.
• Watches and jewellery.
• Rare books and memorabilia.
• Wine and other specialist collectibles.

These markets can attract dedicated collectors and, in some cases, produce substantial gains. However, an item’s rarity or high purchase price doesn’t guarantee that it will appreciate.

Valuations can be subjective, buyers may be difficult to find, and selling can involve auction fees, dealer margins, insurance, authentication and specialist storage.

Collectibles also require knowledge. The difference between a desirable item and an overpriced one can be difficult for an inexperienced buyer to recognise.

For most people, collectibles are better approached as a specialist interest with investment potential than as a straightforward foundation for building long-term wealth.

Part Two: Investing in Non-Physical Assets

5. Stocks and Shares

When you buy a share in a publicly listed company, you acquire an ownership interest in that business.

Companies issue shares to raise capital, and investors buy and sell them on stock exchanges or other markets.

Shares can provide returns in two main ways:

Capital growth: The share price rises, allowing you to sell for more than you paid.

Dividends: The company distributes some of its profits or reserves to shareholders.

Neither outcome is guaranteed. Companies can struggle, suspend dividends or fail, and share prices can fall substantially.

You can invest in individual companies or gain exposure to many companies through investment funds.

Individual shares allow you to choose specific businesses, but they require research and expose you to company-specific risks. A broad fund can spread your investment across many businesses, reducing your dependence on any single company.

For long-term investors, shares are often used as a source of potential capital growth, accepting that prices can fluctuate considerably along the way.

6. Bonds and Fixed-Income Investments

A bond is essentially a loan made by an investor to a government, company or other issuer.

In return, the issuer generally agrees to pay interest and repay the principal at a specified maturity date, subject to its ability to meet those obligations.

Common types include:

Government bonds: Issued by national governments to finance spending and manage borrowing.

Corporate bonds: Issued by companies to raise money.

Inflation-linked bonds: Designed so that specified payments or principal amounts adjust according to an inflation measure.

High-yield bonds: Bonds offering higher yields because they carry greater credit risk.

Bonds can provide income and help diversify a portfolio, but they are not risk-free. Issuers can default, market prices can fall when interest rates rise, and inflation can reduce the purchasing power of future payments.

The risk varies considerably. A bond issued by a financially strong government is very different from a speculative bond issued by a highly indebted company.

You can buy individual bonds or invest through bond funds and bond ETFs.

7. Exchange-Traded Funds (ETFs) and Investment Funds

An exchange-traded fund, or ETF, is an investment fund whose shares or units trade on a stock exchange.

Funds pool money from investors and use it to hold a portfolio of investments. Depending on the fund, these might include shares, bonds, property-related securities, commodities or a mixture of assets.

Some funds track an index, while others follow an actively managed investment strategy.

Examples include:

Global equity ETFs: Provide exposure to companies across multiple countries and markets.

Regional or national equity ETFs: Focus on particular geographical markets.

Bond ETFs: Hold portfolios of government or corporate bonds.

Sector ETFs: Concentrate on particular industries, such as technology or healthcare.

Multi-asset funds: Combine different types of investments in a single portfolio.

Funds can make diversification easier, especially for people who don’t have enough money or knowledge to build a broad portfolio of individual securities themselves.

However, an ETF is a way of holding investments, not a separate guarantee of safety. A fund tracking a broad global index has very different characteristics from a fund concentrated in a narrow sector or using leverage.

Before investing, understand what the fund owns, how it is managed, its costs, its risks and how closely it follows its stated objective.

8. Cash and Cash Equivalents

Cash may not seem like an investment, but it has an important role in financial planning.

Options include:

• Bank and building society savings accounts.
• Fixed-term deposits.
• Money market funds.
• Short-term government securities, such as Treasury bills.

These options differ in risk, access, return and how they are protected. A qualifying bank deposit, for example, is not the same as a money market fund, which is an investment and can carry risks.

Cash can be useful for emergency savings, short-term goals and money you expect to need soon. It can also provide flexibility when other investments are falling.

The main long-term concern is inflation. If the return on your cash consistently falls below inflation, its purchasing power declines.

Cash therefore has a different purpose from investments intended to grow wealth over decades. Keeping some money readily accessible can be sensible even when you are investing elsewhere.

9. Property Funds and REITs

A real estate investment trust, commonly called a REIT, is a structure that allows investors to gain exposure to income-producing property through a tradable security or fund-like investment.

Depending on the REIT, the underlying properties may include offices, warehouses, shopping centres, residential buildings, healthcare facilities or data centres.

Investors may receive distributions from rental income and may benefit if the value of the underlying properties rises.

REITs can offer easier access to property markets than buying a building directly, and listed REITs can generally be bought and sold through a brokerage account.

However, their share prices can be volatile. They can be affected by interest rates, borrowing costs, property valuations, tenant demand and wider stock-market conditions.

A REIT also isn’t the same as owning a property yourself: you hold an interest in a company or investment vehicle, not direct ownership of a particular building.

10. Private Businesses and Private Equity

You don’t have to invest only in companies listed on a stock exchange.

Private businesses can also be investment opportunities, whether through buying a stake in an existing company, funding a growing business or investing through a private equity fund.

Possible routes include:

• Buying part or all of a privately owned business.
• Investing in a start-up.
• Participating in a private equity fund.
• Providing capital to a business in exchange for an ownership interest.

The potential rewards can be significant, but so can the risks. Private businesses may fail, financial information can be limited, valuations are less transparent and selling your stake can be difficult.

Private equity funds may impose substantial minimum investments, long lock-up periods and additional fees. Access to these investments may also be restricted depending on the product and jurisdiction.

Investing in a private business requires careful due diligence and an understanding of how the investment is structured.

11. Peer-to-Peer Lending and Private Credit

Peer-to-peer lending and private credit involve lending money to individuals or businesses outside some of the traditional banking channels.

The investor typically expects interest payments and repayment of the principal under agreed terms.

These investments can appear attractive because advertised interest rates may be higher than those available on cash deposits or some bonds. However, higher yields generally reflect additional risk.

Borrowers may default, platforms may fail, loans may be difficult to sell and recoveries can be uncertain. The advertised interest rate is not the same as the return an investor will ultimately receive.

Understand who owes the money, what security exists, how defaults are handled, what fees apply and whether any protection is available.

12. Intellectual Property and Royalties

Intellectual property includes rights associated with creative works, inventions, brands and certain forms of know-how.

In some circumstances, these rights can generate income through licensing or royalties.

Examples include:

• Copyright in books, music and other creative works.
• Patents covering qualifying inventions.
• Trademarks and brand-related rights.
• Certain licensing arrangements and royalty interests.

An investor may acquire existing rights, fund the creation of intellectual property or purchase an interest in an arrangement that pays royalties.

The value depends on the strength of the rights, their legal ownership, demand, licensing terms and the income they can realistically generate.

This area can overlap with building digital assets. Creating your own book, software product or other intellectual property is a form of asset creation; purchasing rights or acquiring an existing royalty stream is an investment in an asset someone else has created.

Part Three: More Complex and Speculative Investments

13. Cryptocurrency and Digital Tokens

Cryptocurrencies and other digital tokens are another category of investable asset, although their structures and purposes vary widely.

Examples include:

Bitcoin and other cryptocurrencies: Digital assets traded on online markets, with prices influenced by demand, supply, adoption, sentiment and other factors.

Stablecoins: Tokens designed to maintain a value linked to another asset, often a currency. Their stability depends on the design, backing, redemption arrangements and associated risks.

Tokenised assets: Digital tokens intended to represent rights or interests associated with other assets. The legal rights they provide depend on the specific arrangement.

Some people view certain cryptocurrencies as long-term speculative holdings. Others trade them or use them within particular digital networks.

However, cryptocurrencies can be extremely volatile. Investors may face custody risks, fraud, platform failures, regulatory changes and the permanent loss of access to their holdings.

The fact that an asset is digital does not make it safe, and the term digital asset should not be confused with the websites, software and digital products discussed in the separate Building Assets section of this website.

14. Derivatives, Options and Futures

Derivatives are financial contracts whose value depends on an underlying asset, market price, rate or other reference.

Common examples include options, futures, forwards and swaps.

They can be used to manage risk, obtain exposure to markets or speculate on price movements.

However, derivatives can be complicated. Some involve leverage, which magnifies both gains and losses. Certain contracts can create obligations beyond the initial amount paid, depending on their terms.

These instruments can be useful for sophisticated investors and businesses, but they are not necessary for most people beginning a long-term investing journey.

Before using a derivative, you need to understand how it works, what you could lose, any margin requirements and what happens under different market conditions.

15. Hedge Funds and Other Alternative Investments

Alternative investments is a broad term covering strategies and assets that don’t fit neatly into conventional publicly traded stocks, bonds and cash.

Examples include:

• Hedge funds.
• Certain private investment partnerships.
• Managed futures strategies.
• Specialist real estate or infrastructure funds.
• Certain alternative credit strategies.

These investments can use sophisticated techniques, invest in less liquid assets or follow strategies that differ from conventional funds.

Some may provide useful diversification, but others are expensive, opaque or exposed to substantial leverage and liquidity risks.

The label alternative does not automatically mean an investment is better diversified, safer or more profitable. The underlying strategy, fees, transparency and terms matter far more than the label.

16. Currencies and Foreign Exchange

Foreign exchange, often called forex, involves exchanging one currency for another.

Currencies can also be held as part of a broader financial plan, for example to meet future spending in another country or diversify currency exposure.

However, speculative forex trading is different from long-term investing in productive assets. Exchange rates are influenced by interest rates, inflation, economic conditions, central-bank policy and geopolitical events.

Leveraged forex trading can result in rapid and substantial losses. For most long-term investors, currency exposure is more commonly encountered indirectly through international shares, bonds and funds.

17. Other Opportunities and Specialist Assets

The investment universe continues to evolve. Other possibilities include:

• Infrastructure investments, such as energy networks and transport assets.
• Timberland and certain agricultural land investments.
• Natural-resource rights.
• Certain insurance-linked securities.
• Structured financial products.
• Specialist royalty and revenue-sharing arrangements.

These opportunities vary considerably in their complexity, accessibility, liquidity and risk. Some are available through regulated funds; others are private arrangements with limited information and substantial barriers to entry.

They illustrate just how broad investing can be, but there is no need to pursue every available opportunity. Understanding a smaller number of investments well is often more useful than owning a collection of products you don’t understand.

How Do Investments Generate Returns?

Although investment assets can look very different, their financial benefits generally come from a few main sources.

Capital appreciation: An asset becomes more valuable and can be sold for more than it cost.

Income: An asset produces payments, such as dividends, bond interest, rent or royalties.

Business profits: An ownership interest benefits from the profits a business earns and retains or distributes.

Contractual payments: Certain investments provide payments under specified terms, provided the relevant parties meet their obligations.

Some investments combine several of these sources. Shares, for example, can provide both dividends and capital appreciation. Property can generate rent and increase in value.

The return you actually earn also depends on what you paid, transaction costs, ongoing fees, taxes, inflation and whether income is reinvested.

An asset with a high advertised yield isn’t necessarily a good investment. A high yield can reflect significant risk, a falling market price or an unsustainable payment.

How to Think About Risk and Return

Every investment involves trade-offs. Before investing, consider the following.

Risk of loss: Could the value fall, and could you lose some or all of your capital?

Potential return: What might you reasonably expect to earn, and what assumptions support that expectation?

Time horizon: When might you need the money? An investment that fluctuates substantially may be unsuitable for money needed soon.

Liquidity: How easily can you sell the investment and access your money?

Diversification: Are you relying on a single company, property, market, sector or economic outcome?

Costs: What are the purchase costs, ongoing fees, spreads, management charges, storage costs and exit costs?

Inflation: Is the investment likely to preserve purchasing power over the period you hold it? This is uncertain, even for investments with attractive historical returns.

Complexity: Do you understand how the investment works, how it generates returns and what could cause it to fail?

Diversification can reduce the impact of individual investments performing badly, but it cannot eliminate market risk or guarantee a profit. A portfolio containing many investments that all depend on the same underlying factors may be less diversified than it appears.

Where Should a Beginner Start?

Understanding the investment universe is useful, but you don’t need to invest in every asset class.

For many people, a sensible starting point is to establish a sound financial foundation before taking investment risk.

1. Get Your Financial Foundations in Place

Consider keeping accessible emergency savings and dealing with expensive debt before committing money to investments that can fall in value.

Make sure you understand your regular expenses and when you may need access to your money.

2. Define Your Goals

Are you investing for retirement, a future property purchase, long-term wealth accumulation or another goal?

Your goal influences how much risk may be appropriate and how long you can leave the money invested.

3. Learn the Basics

Understand the main differences between shares, bonds, funds and cash. Learn how diversification, compounding, inflation and investment costs affect long-term results.

You don’t need to master every type of investment before you start, but you should understand what you’re buying.

4. Consider Diversification

Rather than relying entirely on one company or asset, consider how different investments fit together.

Broad, low-cost funds can be one way to obtain diversified market exposure, although the suitability of any fund depends on its holdings, costs, risks and your circumstances.

5. Understand the Account and Tax Rules

The account you use can affect tax treatment, costs and access to your investments.

For UK readers, options may include a Stocks and Shares ISA or pension, depending on eligibility and individual circumstances. Check the current rules before making decisions.

6. Keep Costs Under Control

Fees may appear small, but recurring charges can reduce the value of a portfolio over time. Compare platform charges, fund fees, dealing costs and other expenses.

Low costs alone don’t make an investment suitable, but they are an important factor you can evaluate.

7. Think Long Term, Not in Predictions

Long-term investing doesn’t mean ignoring your portfolio or assuming markets always rise. It means building a strategy around your goals and risk tolerance rather than continually reacting to short-term price movements.

Regular investing, diversification and patience can be useful principles, but returns remain uncertain and losses are possible.

Investing Is About Building Wealth, Not Collecting Assets

There are many ways to invest, from owning a single share to holding property, bonds, precious metals or specialist financial products.

The important question isn’t how many asset classes you can own. It’s whether your investments serve a clear purpose, whether you understand the risks and whether the overall approach makes sense for your financial goals.

For many people, a straightforward, diversified portfolio held over the long term may be more appropriate than trying to find the next big opportunity. Others may have reasons to invest in property, private businesses or specialist assets, provided they understand the additional demands and risks.

You don’t need to become an expert in everything. Start by understanding the fundamentals, choose investments that fit your circumstances and keep learning as your knowledge and financial position develop.

Building wealth is a long-term process. The aim is to make informed decisions that improve your financial position over time, rather than chasing every new investment opportunity.

Explore the other side of asset building: Investing is one way to put money to work. You can also create assets of your own, such as websites, digital products and online tools, that may generate income over time. See our guide to Building Digital Assets to learn more.

Disclaimer: This article is for general educational purposes only and does not constitute personalised financial, investment, tax or legal advice. All investments carry risks, and you may lose money. Consider your own circumstances and seek appropriately qualified advice if needed.