You can make money investing when an asset rises in value or pays interest or dividends—but returns are never guaranteed, and you can lose some or all of the money you invest. The practical starting point is to match an investment to a goal and time horizon, understand its risks and costs, and diversify rather than chase a supposedly sure return. The 15 approaches below are options to learn about, not proven ways to earn a profit or recommendations for every investor.
How do investments make money?
The U.S. Securities and Exchange Commission’s Investor.gov defines investing as putting money into assets such as stocks or bonds with the expectation of a return over time. That return may come from an increase in the asset’s value, interest payments, or dividends. An investment can also lose value, and securities are not federally insured like eligible bank deposits.
Compounding occurs when returns remain invested and can themselves earn returns. Investor.gov illustrates the effect with $100 invested each month for 40 years, assuming a 7% average annual return. This is a hypothetical illustration, not a promised or predictable rate. Its introductory page also cites 7–10% as an estimate some experts use for long-term diversified U.S. stock investments based on historical averages; that historical context is not a forecast for an individual investor. Investor.gov’s introduction to investing explains both the potential and the risk.
How do I get started investing?
- Set a goal and time horizon. Decide what the money is for and when you expect to need it. Money for an emergency or a near-term expense may be better kept in savings; investing is generally more appropriate for goals that can tolerate market fluctuations.
- Decide how much you can invest. Consider your overall financial plan and avoid investing money you may need immediately. There is no universally appropriate starting amount.
- Consider your risk tolerance. Think about whether you could stay invested through a decline and how much loss you could afford. Greater potential return generally entails greater risk.
- Choose an account and investment approach. Understand the account’s purpose, rules, costs, and available investments before opening or funding it.
- Research before buying. Read fund prospectuses and other disclosures, check holdings and fees, and do not buy solely because of a stock tip. Investor.gov directs investors to SEC EDGAR to look up securities and company filings. Its getting-started guidance covers planning and research.
15 practical ways to invest
These approaches include both investment types and ways to hold or access them. They differ in risk, liquidity, fees, and complexity. A category name alone does not establish that an investment is suitable, diversified, or likely to make money.
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1. Buy individual stocks
A stock represents an ownership interest in a company. You may benefit if its share price rises or if it pays dividends, but the company or share price can decline and you can lose money. Owning a few companies also leaves you exposed to company-specific risk.
2. Buy individual bonds
A bond is a loan to a government or company that may pay interest. Its risks can include default, changes in market value, and the effect of interest rates; selling before maturity may bring a gain or loss. Review the issuer and bond terms rather than treating every bond as risk-free.
3. Use a diversified mutual fund
A mutual fund pools money from investors to hold a portfolio of assets. A broad fund can provide exposure to many holdings, but it is not automatically diversified: a fund focused on one sector or a narrow group may remain concentrated. Check its prospectus, holdings, investment objective, and expenses.
4. Use an exchange-traded fund (ETF)
An ETF holds a portfolio of assets and trades on an exchange. Like a mutual fund, it may help spread exposure, but a narrowly focused ETF can still concentrate risk. Compare holdings, trading costs, and fund expenses; the ETF label does not guarantee diversification or positive returns.
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Money-market funds are investment funds, not bank deposit accounts. They may be used for cash-like exposure, but they still carry investment risks and are not federally insured like eligible bank deposits. Read the fund’s disclosures and distinguish it from a bank money-market deposit account.
6. Consider U.S. Treasury securities
Treasury securities are debt issued by the U.S. government. Their terms and maturities vary, and their market value may change if sold before maturity. Check the security’s terms and how it fits your time horizon; “government-issued” does not make every price or liquidity outcome the same.
7. Invest in real estate
Real estate can produce rental income or appreciate, but property ownership can involve substantial costs, maintenance, vacancies, and difficulty selling quickly. Real estate investment products also have their own fees and risks. Consider the liquidity and concentration involved before committing money.
8. Consider precious metals
Gold and other precious metals may rise or fall in price, but they do not necessarily generate interest or dividends. Storage, transaction costs, and price volatility can affect outcomes. Treat them as a distinct asset category, not as a guaranteed hedge or source of profit.
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9. Consider commodities
Commodities such as energy products or agricultural goods can be volatile and may be accessed through products with different structures and costs. Understand what the investment actually holds or tracks and how its price can move before investing.
10. Review annuities carefully
Annuities are contracts with an insurance company and can have complex terms, fees, restrictions, and guarantees that depend on the contract and issuer. They are not interchangeable with stocks, bonds, or deposit accounts. Read the contract and understand surrender restrictions and costs before committing.
11. Understand private equity
Private equity investments may involve ownership in companies that are not publicly traded. They can be difficult to value or sell and may have high minimums, long holding periods, and limited disclosure. Availability and suitability depend on the specific offering and investor circumstances.
12. Use an employer retirement plan
Workplace retirement plans, including traditional and Roth 401(k)s, can offer tax features depending on plan rules and individual circumstances. Investment choices, fees, eligibility, and tax treatment vary. Read the plan documents and check current rules rather than assuming every plan works the same way.
13. Consider an IRA
Traditional and Roth IRAs are individual retirement account types with different tax treatment under applicable rules. Eligibility, contributions, deductions, and withdrawals depend on current law and circumstances. Verify current requirements with official tax guidance or a qualified professional before relying on a tax benefit.
14. Consider a 529 education savings plan
A 529 plan is an education-focused account with tax features that depend on plan terms and applicable law. Plans differ, and tax treatment may depend on the state and how the funds are used. Check the plan disclosure and current rules before choosing one.
15. Invest through a direct or dividend reinvestment plan
Some companies offer direct investing or dividend reinvestment plans (DRIPs), which may let investors buy shares or reinvest dividends through a plan rather than placing each purchase through a brokerage. Plan availability, fees, purchase terms, and diversification vary. Reinvested dividends remain subject to investment risk and may affect taxes.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How should I balance risk, time horizon, and diversification?
Asset allocation means distributing investments among categories such as stocks, bonds, and cash. A longer time horizon may allow more room to tolerate market swings, while money needed soon generally calls for closer attention to stability and access. The right allocation depends on your goal, ability to bear losses, and investment choices; there is no mix that guarantees a return.
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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallDiversification spreads money across investments to reduce some portfolio risk, but it cannot prevent losses when markets fall. Owning several funds may not add much diversification if they hold many of the same companies. Review a fund’s top holdings, sector exposure, and overlap with other investments. A mutual fund or ETF can make it easier to hold many investments, but a narrow fund may still be concentrated.
What should I know about investment fees?
Fees reduce the money that remains invested and can compound into a meaningful difference over time. Check account fees, transaction charges, fund operating expenses, and other applicable costs in account disclosures and fund prospectuses.
In a hypothetical example published by the SEC’s Office of Investor Education and Assistance in a bulletin dated July 23, 2025, $100,000 invested for 20 years at a modeled 4% annual growth rate would grow to about $208,000 with a 0.25% annual fee, $198,000 with a 0.50% fee, and $179,000 with a 1.00% fee. These modeled figures illustrate fee effects; they are not a forecast of actual investment returns. See the SEC’s fee and expense bulletin for the assumptions and explanation.
Which accounts can support retirement or education investing?
Common U.S. tax-advantaged account types include traditional and Roth 401(k)s, IRAs, and 529 plans. Depending on the account and rules, tax advantages may include a deduction, tax-deferred growth, or tax-free withdrawals. Those features are not identical across accounts, and eligibility, contribution limits, and tax treatment can change or depend on personal circumstances. Verify current federal and state rules and the account’s own documents before making a decision. The SEC’s saving and investing overview describes these account categories.
How can I avoid investing scams?
Be skeptical of anyone promising high returns with little or no risk. Other warning signs include pressure to act immediately, fear-of-missing-out tactics, fake testimonials, promises of great wealth, unsolicited opportunities, and suspicious payment methods. A stock tip or online claim is not a substitute for researching the investment and the person offering it. Investor.gov’s fraud guidance and the SEC’s March 31, 2026 investor alert describe common red flags.
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