Before you decide how to invest, learn about the potential risks and rewards of the 4 main kinds of assets – shares, bonds, property and cash.
There are several different classes of asset, each with its own strengths and risks. By spreading your money across a range of assets, you can create a portfolio that balances risk, growth and income according to your priorities. Spreading your money out across assets in this way is called diversification. It can help you lower overall risk, since different kinds of assets perform well at different times.
- Shares are high-risk investments, but they offer the best long-term returns;
- Bonds are investments that can provide a steady income;
- Property, particularly buy-to-let property, takes time to manage. But the potential rewards include income from rent and capital gains if housing prices rise;
- Cash is a safe and familiar asset, but one with very low returns.