Investment variety

The investment universe is made up of a number of asset classes, or investment categories, each of which puts your money to work a little differently.

Stocks, bonds and cash equivalents are the asset classes you're most likely to hear about. There are a number of reasons for their popularity, including:

• They are easy to buy and sell
• They're available at a wide variety of prices
• They have a history of providing positive returns — though the returns aren't guaranteed and they're not positive every year

You can buy and sell these investments through a brokerage account that you establish at your bank or brokerage firm. When you give an order, typically online or over the phone, your broker carries out your instructions, and you'll typically pay a commission on each transaction. In some cases, you can buy and sell directly through the company or government that offers the investments for sale. For example, you can use direct purchase plans (DPPs) to buy stock directly from some companies.

The fund approach

You can also invest in stocks, bonds and cash by purchasing mutual funds or exchange-traded funds (ETFs). Both types of funds own a pool, or collection, of investments of a particular type. Every fund indicates the type of investments it makes in the prospectus and other official documents that it provides to investors. Some mutual fund companies sell shares directly to investors, and other funds as well as ETFs are available through banks or brokerage accounts.

Buying property

Real estate is another well-known asset class, and it's often the first one that a person invests in. That's evident in the fact that more than 68% of the people in the United States own their own homes instead of renting. Like other asset classes, real estate can play a role in meeting your financial goals because it often becomes more valuable over time or provides a source of income or profit when you sell.

At the same time, real estate is an unusual asset class because most people who buy a home buy it first as a place to live and only secondarily as a way to make money. Sometimes, real estate isn't very liquid, especially in a slow market. That means it can be hard to sell quickly, or you may not get the price you want.