We'd also like your consent to set other cookies to help us further improve our website and to tailor the marketing you see on apps and other websites you visit.
Select "Accept all" to agree to all cookies, or "Manage" to choose which cookies we use.
If you're thinking about investing, it's useful to know about asset classes. These are types of investments which have their own risks and benefits and work in different ways. That’s why it’s helpful to know the differences between them.
There are four main groups of asset classes: equities, bonds, property and money market investments (including cash). There are also specialist and other types of investments, including commodities - which are things like metals, minerals and agricultural products.
Each investment type has its own characteristics and reacts differently to things like world events, politics, economics and interest rate moves. The values of some assets are also more likely to rise and fall than others. You might hear this called volatility.
Because asset classes tend to behave differently, they each have a different level of risk and potential returns. As you can see below, there's a trade-off - usually you have to take on more risk if you want to aim for higher returns.
Now we’ll take a closer look at different types of investments and some useful things to know about them.
The mix of investments in an investment portfolio is called asset allocation. You can choose whatever mix of investments you like but experts tend to agree that having a wide mix is a good idea. This is known as diversification and, with this, you'll be aiming for a good balance between risk and return. If you invest only in one or two asset classes or types then you could be taking on quite a lot or not enough investment risk to meet your goals.
Financial professionals will have a team behind them, as well as the knowledge and tools they need to create a portfolio. That's why trying to build a diversified portfolio yourself could be difficult and time consuming. So, many people decide to invest in a ready-made diversified fund instead.
You can learn more in our guide to diversification:
Investing through a fund means that your money is pooled with other people’s money. There are a few reasons why you might want to think about doing this.
You can start investing through a Stocks & Shares ISA or a pension plan. Pick an option to find out more.
Start saving and investing for the future with a Standard Life Stocks & Shares ISA. Choose from two investment options and find out more.
Save and invest money with a pension plan to help pay for life in retirement. Look at your options with this pension plan here.
You can get more information about investments and important things to think about.