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What can I invest in?

What can I invest in?
We have outlined some of the most common types of investments below.

Many sure you only invest in something you understand. So if you decide to buy shares in a company, make sure it’s a company that you know about or even use yourself.

The same can be said for financial products. If an investment product seems complicated and you’re struggling to wrap your head around it, don’t touch it with a barge pole.

Shares
A share is a little piece of a company. When you buy a share you own a slice of that firm, so when it does well, you do too.

You earn money when:

The value of your shares go up if the company does well (which is your investment return)
Or by receiving a portion of the profits that these companies make, known as dividends
The 100 biggest companies in the UK are listed on an index called the FTSE 100. Find out more: How to buy shares.

Here are the pros and cons of buying stocks yourself:

Pros
You can pick the exact company you want to buy stocks for, from Rolls-Royce to Hotel Chocolat
If the company is successful the rewards can be substantial in share price increases and dividend payments
Cons
You are picking the shares so you have to make a call on the future growth of companies
If you buy stocks with a firm that performs badly, you could lose your money
Find out if now is a good time to buy stocks here.

Bonds
You lend money to a company or country. You will be paid a set amount at the end of the period when the bond “matures”, as well as regular interest payments known as coupons.

Pros
Generally speaking, bonds are considered lower-risk than shares.
Cons
As the risk is lower, so is the potential for a reward. Your investment returns are likely to be smaller than shares as a result.
Funds
Instead of choosing your own individual shares, you can put your money into a mutual fund. This is effectively a group of shares, though managers can invest in other types of asset like bonds.

If buying a share is like backing the star player of a football team, a fund is equivalent to picking the entire squad. So if one player doesn’t do well, there are others who can pick up the slack.

You have a choice between:

Passive funds that track a stock market
Active funds where a professional investor picks stocks on your behalf
If you want to know more, find out how to choose investment funds here.

Here are the pros and cons of funds:

Pros
A manager uses their expertise to decide which shares and range of assets to buy and sell
Funds include many types of investment so are often less risky than individual shares
Cons
Fund managers charge a fee
The overall value can still fall despite having a range of assets to balance risk
Property
We have all seen how house prices have increased so it’s little wonder that people invest in property.

While most people think of residential property investment, you can also invest in commercial property like warehouses and shopping centres.

A good way to invest in commercial property is buying an investment trust where a manager selects a number of properties to invest in.

Precious metals
You could also invest smaller amounts in other asset types, such as precious metals like gold and silver.

Precious metal investments can help diversify your portfolio and tend to be uncorrelated to the stock market. In other words, if stock markets fall, you may find that the price of gold rises as people flock to this “safe haven” asset to house their cash.

You can invest in precious metals by buying an investment fund that specialises in this sector.

For some inspiration we outline the big investment trends here.