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Investment types

Investment options

As you put together your portfolio, you'll need to do a little digging into the different types of investments. Here's help making sense of it all.
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Understanding investment types

Points to know

  • Most investors divide their portfolios between stocks and bonds, with potentially a small cash portion.
  • There are many different types of stocks and bonds that offer various levels of risk and reward.
  • In addition to stocks and bonds, there are other kinds of investments that add additional risk and complexity, which may not be right for everyone.

Certificate of Deposit (CD)

An insured, interest-bearing deposit at a bank that requires the depositor to keep the money invested for a specific period of time. CDs can be traded on the secondary market.

Risk

The potential to lose money (principal and any earnings) or not to make money on an investment.

Portfolio

All the securities held by a mutual fund or the total investment holdings of an individual or an institution.

Bond

A debt security (IOU) issued by a corporation, government, or government agency in exchange for the money the bondholder lends it. In most instances, the issuer agrees to pay back the loan by a specific date and make regular interest payments until that date.

Interest

The amount or rate charged when money is borrowed. For example, when you invest in bonds, you receive interest payments from the bond's issuer.

Income

The interest and dividends generated by an investment.

Stock

A security that represents part ownership, or equity, in a corporation. Each share of stock is a proportional stake in the corporation's assets and profits, some of which could be paid out as dividends.

Diversification

The strategy of investing in different asset classes and among the securities of many issuers in an attempt to lower overall investment risk.

Cash investments

"Cash" investments like money markets and CDs have the least risk of all investment types. They can be used to hold money you're waiting to invest or to lower the overall risk of your portfolio.

Use cash investments for safety & security

Bond investments

Companies and governments issue bonds and then pay interest to their buyers. You can buy bonds to get income and to temper the risk of stock investments.

Use bonds for income & additional stability

Stock investments

You can own pieces of companies through stocks, giving your portfolio the chance to gain value over time.

Use stocks to add the opportunity for growth

DOMESTIC OR INTERNATIONAL?

The United States isn't the only place to find stocks and bonds. You can get even more diversification by looking beyond our borders.

Invest internationally

Other kinds of investments

Your portfolio will probably be mostly made up of stock and bond investments, and potentially some cash. But there are other types of assets you might want, depending on your goal and how sophisticated your investment strategy is.

Learn about "hybrid" securities

Get information about call options & put options

Understand alternative investments

We're here for you

If you'd like some help with your investing decisions, here are a couple of ways you can get the answers you need.

Partner with a Vanguard advisor. If you'd like a professional to oversee your portfolio for you, we can do that. Research shows that an advisor who provides professional financial planning, coaching, and portfolio oversight can add meaningful value compared with the average investor experience.*

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*Source: Francis M. Kinniry Jr., Colleen M. Jaconetti, Michael A. DiJoseph, David J. Walker, & Marcia C. Quinn, 2022. Putting a value on your value: Quantifying Vanguard Advisor's Alpha®. Valley Forge, Pa.: The Vanguard Group.

Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.

The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.

VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.