What to Invest In: 9 Types of Investments to Make Money in 2024

So, you’ve decided you want to invest some of your hard-earned cash. But choosing exactly what to invest in can seem daunting. After all, there are many different types of investments and potentially thousands of choices within each category.

Each type of investment has its pros and cons, and it often makes sense to invest in several different types of assets, depending on how long you have to invest, your appetite for risk (essentially meaning how well you cope with volatile prices), and what your end goal is.

It’s not a hard-and-fast rule, but risk and reward often go hand in hand. The types of investments that potentially offer the greatest returns over the long term tend to be more volatile in price over shorter periods. Therefore, if you want higher returns, you should expect the ride to be bumpier. Investments that promise high returns but low risk often turn out to be too good to be true.

9 types of investments

Let’s start by looking at the seven main types of investments you can invest in:

1. Stocks and shares

Investing in stocks and shares, also known as equities, allows you to buy a small piece of some of the largest businesses today. As an owner of an individual stock, you’re entitled to a slice of the profits typically distributed through dividends or share buybacks. And you’re also able to vote on certain matters, such as the appointment of directors.

A share’s price fluctuates daily. And prices can be incredibly volatile in the short term. However, in the long term, if the underlying business is performing well, the share price will move upward. After all, the more profits a company generates or is capable of generating in the future, the more valuable each share becomes.

This type of investment obviously carries some risk. But this risk is paired with the potential for enormous returns. That’s why we at The Motley Fool believe stocks and shares are probably the best asset class for building long-term wealth. Investors can choose to pick individual stocks like we do or offload this responsibility to a professional by investing in a mutual fund, index fund, or unit trust.

RELATED: How To Invest In Stocks: A Beginner’s Guide For Getting Started

2. Corporate Bonds

A bond is a form of debt that can be bought and sold like a stock. Much like a bank charges interest on loans to customers, a bondholder receives interest from the debt they have bought.

Bonds are often considered to be a safe investment, as debtholders get priority of repayment over shareholders. But this reduced risk comes at the cost of returns. 

Corporate bonds typically provide fixed-rate interest fees that can last for several months to decades before maturity. It’s also worth noting that the price of a bond, like a stock, can fluctuate and usually drops if the underlying business is at a higher risk of defaulting on its loans. Needless to say, that can have a significant impact on an investment portfolio.

3. Government Bonds

Instead of buying the debt of a business, investors can opt to grab debt from governments. Typically, government bonds, which are called gilts in the UK, carry less risk as they are backed by tax revenue.

These instruments are issued directly by the UK Treasury through HM Debt Management Office. And investors can either buy them directly or indirectly though a government bond fund or exchange-traded fund (ETF).

However, the lower risk profile of this instrument also means they typically offer lower returns compared to corporate bonds.

4. Real Estate

Property has arguably been a favourite type of investment in the UK in the last few decades. Like most assets, it comes in different flavours, such as land, residential (housing), and commercial real estate.

Typically, property investors rent out the available space for a period of time, receiving a monthly or quarterly fee in return. However, the value of real estate can also vary during this time in either direction. Should the price go up, you can enjoy some significant returns if you decide to sell or simply increase the rental amount. However, the opposite is also true.

One crucial difference with real estate is that you often need to borrow money to buy this type of asset, commonly in the form of a mortgage. That means any rental income needs to cover the interest fees of this loan before any profits can be made from the investment. And this profit margin can also become compromised should the value of the property fall over time.

5. Commodities

A commodity is a basic good consumed, either because it gets eaten/drunk or when it is used to make something. Think coffee, orange juice, wheat, and rice for the former and copper, oil, gold, and silver for the latter.

Commodity prices are mainly determined by the fluctuations in the available supply as well as demand. Consequently, this type of investment can be extremely cyclical and volatile. Even temporary shortages or problems in logistics can create wild price swings. Commodity prices often move in long cycles, being depressed for several years and then rising for a similar length of time. In terms of potential returns, commodities probably offer more than bonds but less than stocks and shares. However, it’s worth noting that a special type of brokerage account is needed to trade this class of assets, which are usually only reserved for professionals.

6. Currencies

Many financial institutions and companies buy and sell different currencies, like the pound, the US dollar, the euro, and the yen. 

Some of this is pure speculation, betting that prices might move because one economy will become stronger than another. But in the case of businesses operating internationally, buying and selling currency is standard practice. 

Various currency contracts can be purchased that guarantee a certain exchange rate at some point in the future. Businesses primarily use investing in currencies as a risk-reduction tool. But due to the volatile nature of exchange rates, these types of investments require expert knowledge and experience to execute profitably.

7. Art and collectibles

Our final type of investment is probably the most diverse, and some people might not even regard as an asset class. It covers things like paintings, wine, stamps, old comic books, and so on. Essentially, it’s anything that has value because it’s unique or there are limited numbers available.

Like some of the other more specialised asset classes, you often only discover the price when you come to sell, and long-term returns are hard to gauge. You also incur costs just by owning these assets in the form of insurance and storage. And they could get damaged and lose some or all of their value.

8. Savings accounts

Putting money into a savings account isn’t often considered to be a form of investment but rather just a safe place to park some cash. For the last decade, this has largely been the case given that interest rates were nearly 0%, and even the best savings accounts offered negligible returns.

However, since inflation came along, interest rates have risen considerably. As have the returns offered by savings accounts. Compared to other asset classes, the returns offered by depositing money in a bank or building society aren’t as exciting. Yet, these funds are usually almost instantly accessible, and thanks to insurance from the Financial Services Compensation Scheme (FSCS), risk-free up to £85,000.

9. Eliminating Credit Card Debt

Paying off debts is another form of investment that often gets overlooked. And for some individuals, it could be one of the best, especially when it comes to credit card debt.

Even the best credit cards available to the highest credit scores still demand a near 30% interest rate on overdue balances. And despite the phenomenal returns offered by asset classes like stocks and real estate over the last 50 years, none have come even close to reaching this level.

That’s why if an investor has to choose between buying shares or paying off a credit card, choosing the latter is likely always going to be the far wiser decision.

What should you invest in?

You probably want a mixture of different asset types to spread your risk and diversify. For most people, stocks, bonds, and property are likely to be the three main components of an asset allocation strategy to meet their financial goals. In fact, most people already have exposure to property as they own a house or may have a mixture of stocks and bonds in their pension. So, it’s useful to consider what you already have before deciding what to invest in next.

Some types of assets are very easy to buy and sell. And you can deal in pretty much any size you want, from a few pounds to a few million. However, assets like art and directly held property are a lot harder to buy and sell and typically can’t be done piecemeal.

On a similar note, some assets require virtually no effort to hold onto, whereas others require constant monitoring and ongoing costs. 

For example, index funds simply track the global markets and an investor can let them do their own thing for decades. But if you own a rental property, you could get a call in the middle of the night saying urgent repairs are needed to fix a leak.

These factors need to be considered when making investment decisions. Tax is another important component. Stocks and shares and bonds are relatively easy to shelter in tax-efficient vehicles like ISAs and pensions. In contrast, other more specialised types of assets are trickier and, therefore, could be more exposed to capital gains tax.

What is the best investment with the highest return?

Of all the investment types explored, which is capable of delivering the highest and best returns?

When looking at historical performance, the answer very much depends on the time period. There have been plenty of occasions where commodities like gold or real estate like residential properties have vastly outperformed stocks. The same goes for bonds, both corporate- and government-issued.

However, when zooming out to capture the entirety of the last century, stocks have landed on top by quite a significant margin in terms of generating returns. Yet, despite this, that doesn’t necessarily make equities the best investment in 2024.

As previously mentioned, there are a lot of factors to consider when making an investment decision. And most of the time, what might be the best investment for one individual could be a terrible one for another.

For example, a young investor seeking to build wealth may find stocks to be a perfect fit for their portfolio. But a pensioner who is more focused on protecting what they already have may discover that bonds are far more suitable.

Beyond personal preference and investment objectives, there’s also the question of risk tolerance. The higher-performing asset classes tend to be more volatile. And not everyone is comfortable seeing their portfolio value fluctuate like a pendulum.

Where to invest? 

Investing is a two-sided coin. Knowing what to invest in is one face. Knowing where to invest in the other. 

There are different types of investment accounts available to UK investors. Each one works slightly differently. Some are tax-efficient, helping you eliminate an often-overlooked investing expense. Others will let you buy fractional shares or provide investment advice.

Let’s look at the most common types of accounts, so you can pick which one or ones are most suitable for you.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

When should you invest?

Thanks to the beauty of compound interest, the sooner you can start investing, the better.

But not everyone is in a position to start building a portfolio for the next couple of decades. Fortunately, investing in stocks and shares over shorter periods can still be a lucrative venture.

Turning to figures from Barclays Capital, we can see that shares have beaten cash the majority of the time over shorter periods as well.

Even over a period as short as two years, the chances of shares beating cash are two in three. We advise that you shouldn’t invest in shares for any period shorter than five years. The rationale is that the chances of losing money in less than five years, while fairly small, are still quite significant.

For example, there have been two occasions in the past 100 years where shares have fallen three years in succession. So you’re usually better off sticking to cash if you have definite plans for your money in the next five years (to put down a deposit on a house, for example).

So, the earlier you invest, the better. It’s advisable to keep a portion of your money in cash in case of emergencies. Three to six months’ salary is a good guide as this is often the period you’ll need to cover before any insurance policies you may have started to pay out.

The Foolish bottom line

Choosing what to invest in doesn’t have to be overwhelming. Start early, invest often, hold for at least five years, and you’re on the right track.