Where to Invest Your Money in 2025

Investing can play a key part in growing wealth and building retirement savings.

The past 20-year average stock market return was more than 7% (inflation-adjusted), based on the Dow Jones Industrial Average and S&P 500 indices. With a diversified investment portfolio, you can put yourself in a better position to reach your financial goals, which likely include:

• Emergency fund
• Home down payment
• Education expenses
• Growth
• Retirement

Now, it doesn’t have to be overly complex and daunting to start investing and growing your wealth.

From comprehensive, full-service brokerages to financial advisory services, you have access to many options to help guide you along the way. Choose your financial goal below:

Types of Investments to Consider

With numerous different investments available, you should better understand what you’re most likely to invest in. Each of them has different ways to generate returns and different levels of risk involved.

Stocks

Stocks represent share ownership in a particular company. 

Generally, your stock value will increase if the company’s share price rises. Similarly, a drop in the stock price means your investment will decrease in value.

• How to Buy Your First Stock
• Making Trades: Market Order vs. Limit Order
• What is the Historical Stock Market Return?
• When to Sell Your Stocks

Bonds

A bond is a debt obligation issued by companies or governments that pay a fixed interest rate.

Because of their low risk, bonds are typically considered safe investments that generate low but predictable returns.

• Bonds vs. Savings Accounts
• Individual Bonds vs. Bond Funds: What’s the Difference?
• Municipal Bonds: Pros and Cons to Consider

Mutual funds

Mutual funds are a basket of investments focusing on a particular asset class or investing strategy (e.g., index-tracking, large-cap growth, precious metals, sustainable investments, etc.).

Mutual funds can comprise any mixture of stocks, bonds, other securities, and multiple mutual funds.

• Index funds: mutual funds that aim to mimic the performance of a particular index
• Target-date funds: usually made up of multiple mutual funds that will automatically lower the risk of the fund (often by reducing holdings in stocks and increasing holdings in bonds) as you approach your target retirement year
• Index Funds vs. Managed Mutual Funds
• Guide to Mutual Fund Broker Fees

ETFs

Exchange-traded funds (ETFs) serve a similar purpose to mutual funds. However, ETFs can be traded at any time during open market hours. 

Mutual fund orders, on the other hand, are only executed when the market closes for the day.

• Building an ETF-Only Investment Portfolio
• How Expense Ratios Affect Your Investment Returns

Cash equivalents

Cash equivalent investments help investors minimize the risk of dropping in asset value. Typically, they offer meager returns but are easy to access if you need the money in a financial emergency.

Here are typical examples of cash equivalent investments:

• Certificates of deposit (CDs): Investors deposit funds for a set amount of time (usually 1 to 5 years) and earn a higher interest rate than savings accounts
• High-yield savings accounts: Highly liquid bank accounts that hold your cash with opportunities to earn interest, especially with online banks
• Money market accounts (MMAs): Money market accounts are similar to savings accounts with some checking-account features, and they tend to offer higher interest rates but require higher deposit minimums

Real assets

Tangible assets are physical assets that you may consider investments due to their potential increase in value, ability to generate income, or both.

Common examples include:

• Real estate (i.e., land, buildings, infrastructure, etc.)
• Precious metals (e.g., gold, silver, etc.)
• Natural resources
• Commodities
• Collectibles

Tangible assets as investments may have their risk profile and factors to consider.

For example, with real estate, you may have to deal with maintenance costs and other expenses such as utilities, insurance, repairs, and property taxes.

Annuities

Annuities are a form of guaranteed income designed to provide stable income to minimize the likelihood of outliving your assets in retirement.

You often buy an annuity in large premium payments or a lump-sum payment.

Annuities can come in various types, and they can become quite complex. It is best to consult a financial professional to discuss how annuities can be part of your financial strategy.

Cryptocurrency

Cryptocurrencies are digital currencies based on blockchain technology. Bitcoin and Ethereum are among the most popular cryptocurrencies. However, due to their volatile nature and the category's relatively young age, cryptocurrencies are often considered on the riskier end of the investment spectrum.

What is Your Risk Tolerance?

Your risk tolerance is your comfort with the uncertainty or potential loss associated with your investments.

It will play a significant role in the types of investments that you choose for your portfolio.

• If you have a high-risk tolerance, you may favor more volatile investments that have the potential to generate higher returns but also have the potential for bigger losses.
• If you have a low-risk tolerance, you may favor less volatile investments with lower but predictable returns while there’s less risk that you’ll lose your money.

Financial advisors often highlight that younger investors have more time to recover from large investment losses. Therefore, they can build a portfolio with an asset allocation that consists of a higher percentage of stocks.

When investors get older, they may transition slowly from stocks to low-risk investments, such as bonds, CDs, and cash-equivalent accounts or financial instruments.

As investors reach retirement age, they have less time to recover from significant losses from stock price declines. So, it is often recommended to maintain an investment portfolio with an asset allocation that contains a much lower percentage of stocks at this age.

Popular Investment Strategies

Here are some of the popular investment strategies to help you build a portfolio that fits your risk tolerance and your financial goals:

Growth investing

A growth investing approach is focused on the expected higher growth potential of stocks compared to the market or industry. Usually, this strategy looks at young or small companies.

Value investing

A value investing strategy focuses on companies that investors believe are undervalued. Essentially, the stock price of the company is believed to be valued less than it should be.

Income 

An income investing strategy will emphasize steady cash flow with investments that tend to generate income rather than relying solely on the increase in asset value. Such a portfolio may include dividend stocks, bonds, cash-equivalent accounts, and real estate.

Diversification

With diversified portfolios, investors can reduce the risk of a single investment causing most losses. Diversification can be achieved by owning a mixture of assets. Typically, investors can diversify easily by investing in mutual funds and ETFs, especially index funds or index ETFs.

Dollar-cost averaging

Dollar-cost averaging is a strategy based on the repeated purchase of a particular asset investment over time--the cost of investing with “average out.”

It could reduce the effect of volatility on the asset’s price and eliminate the allure of timing the market.

How to Pick a Brokerage

You’ll likely need a brokerage account when investing in the stock market.

You have many choices regarding brokerages that will allow you to build an investment portfolio. To help you decide on the right brokerage for you and your intended investing style, here are the key factors that you should consider:

Minimums

Depending on the brokerage and the type of investment, there may be a minimum account asset value or minimum investment.

For many mutual funds, for example, a minimum required investment may range from $1,000 to $3,000. Even if you can open a brokerage account, you may not be able to start investing until you have enough money. Luckily, many brokerages offer in-house funds that have no minimums.

Fees

Every brokerage will have its fee schedule for various services -- from account maintenance to trading fees.

Depending on your preferred type of investment, you should choose the brokerage with account fees that will allow you to trade and own that type at the lowest cost.

Account maintenance fees

Every brokerage may have its fee structure for account maintenance fees -- many don’t have any monthly maintenance fees.

Typically, account fees may be flat or vary based on the total assets managed. 

Commission fees

Most brokerages will charge commission fees depending on the transaction type. Commonly, commission fees apply when you buy or sell a security.

If you’re transacting frequently, you may pay heavily for trading costs.

That said, brokerages may waive commission fees when trading certain securities or if you maintain many assets in your account.

Ideally, you choose a brokerage with the lowest commission fees for transactions of your preferred investments.

Expense ratios

Expense ratios help investors understand the total annual cost of a mutual fund or ETF. It includes the various fees and costs associated with managing the fund.

It is represented as a percentage that is deducted from the amount you have invested in the fund.

Typically, actively managed funds will have a higher expense ratio, while index funds tend to have lower expense ratios.

As an investor, you must account for the expense ratio against the fund's performance to determine the return on your investment.

Accounts types offered

A brokerage account can have special tax advantages but are also subject to financial regulations and rules. 

You’ll want a brokerage that offers the type of account you want.

Taxable brokerage account

A taxable brokerage account is a standard investment account that may allow you to buy, sell, and hold various securities, including stocks, bonds, mutual funds, ETFs, and more (depending on the brokerage).

You do so with post-tax dollars when you put money into a brokerage account. You will also have to deal with capital gains taxes on investment profits. Essentially, no tax advantages often come with designated retirement accounts.

Taxable brokerage accounts are often suggested for investors who have already maxed out contributions in their tax-advantaged retirement accounts (such as a 401(k) plan and/or IRA). They are also appropriate for investors who do not want their investments held in retirement accounts that may restrict access to those assets without penalties.

Traditional IRA

A traditional IRA is a retirement account that allows tax-deductible contributions. You can reduce taxes on your income in the years that you contribute. 

Investments in a traditional IRA will grow tax-deferred until you withdraw from it during retirement. Qualifying withdrawals are taxed at the current income tax rate in retirement.

Traditional IRAs are typically best suited for taxpayers who want to reduce tax liability on their high incomes.

Roth IRA

A Roth IRA is a retirement account that doesn’t allow for tax-deductible contributions. 

While you don’t get tax advantages when contributing, your withdrawals during retirement are tax-free.

Roth IRAs are usually recommended for taxpayers with lower income (and a corresponding lower income tax rate) earlier in their careers.

Robo-advisory services

Brokerages and other financial companies may offer robo-advisory services that help automate the management of your investment portfolio.

The robo-advisor will account for your risk tolerance and/or desired investing style and help you choose a group of investments that aligns with your goals. Every time you add money to the account, it will be distributed to maintain that portfolio allocation. 

Over time, as the values of the investments change, the robo-advisor will buy and sell investments to maintain the proper allocation.

Robo-advisors are brokerages that offer a more hands-off approach to diversified investing.

What You’ll Need to Open a Brokerage Account

Generally, opening a brokerage account can be completed in 10 minutes if you have all the information ready. 

After that, it may take a couple of business days for the brokerage to confirm that your account is open and the funds are ready for investing.

Documents and information needed usually include:

• Full name
• Address
• Date of birth
• Social Security number
• Bank routing and account number
• Current employer’s name and address (brokerage is required to ask for it)

Beneficiaries

As with most financial accounts, you can designate beneficiaries for your brokerage account. Essentially, you’re telling the brokerage who gets your assets if you pass away.

Note: Beneficiaries do not have any ownership rights to your brokerage account when you’re alive.

If you do not list beneficiaries upon account opening, you can add them later. Also, contact a legal professional for advice on choosing beneficiaries and other estate-planning needs.

How to Pick Cash Equivalent Accounts

Choosing a cash equivalent account is significantly easier than picking a stock or mutual fund to add to your investment portfolio.

Due to the low-risk nature of cash equivalent accounts, there are fewer variables to consider. They include:

• Interest rate
• Fees
• Minimums
• Ease of access

Interest rate

The interest rate on a savings account, money market account (MMA), or certificate of deposit (CD) is likely the biggest factor in your decision.

It’s safe to say that you’ll prefer an interest rate as high as possible when you open the account.

With savings accounts and MMAs, the interest rate is variable and can change without notice.

With CDs, the interest rate is usually fixed for the life of the CD’s term. Exceptions to this rule include flexible CDs that allow you to bump the interest rate (usually only once) before the CD reaches maturity.

Fees

Cash equivalent accounts may come with various fees that reduce the effective returns on your cash investments.

Commonly, savings accounts and MMAs have monthly fees -- fee waivers may include a minimum balance, direct deposit, or other types of recurring activity. Transaction fees, such as transfer and excess withdrawal fees, may also apply.

CDs don’t typically have monthly fees, but they may have early withdrawal fees for taking your money out before the CD term lapses. 

Minimums

There may be minimum deposit amounts or balances that you have to maintain to open an account or to keep the account.

For example, you may need to commit at least $1,000 to open a CD. Or, an MMA may have a higher interest rate, but this applies only when your total account balance is $10,000 or more.

Be aware of the minimums to maximize your account's interest earnings.

Ease of access

The big benefit of cash-equivalent accounts is that they are usually very easy to access in a financial emergency.

Savings accounts usually require a funds transfer or ATM withdrawal to move or access your money.

MMAs may offer the added features of a debit card or a checkbook for check-writing capabilities.

CDs are the least accessible cash-equivalent accounts because they are designed to be left untouched. The early withdrawal penalty is the only hurdle to withdrawing money on a CD.

CDs are typically a better investment if you’re comfortable with not using the money for a long period because they tend to provide higher interest rates.

Tax Considerations

Tax implications should concern all investors because they can have a drastic effect on the bottom line. (New investors are advised to consult a tax professional or financial advisor for help with their specific tax situations.)

Capital gains tax

Capital gains tax is imposed on profits resulting from an asset's sale, and the tax rates are determined by how long you’ve held the asset.

• Short-term capital gains tax applies to assets held for one year or less.
• Long-term capital gains tax applies to assets held for more than one year.

Different rules may apply to collectibles, home sales, and certain tax-advantaged accounts such as IRAs and 401(k)s.

Tax-loss harvesting

Investors often harvest tax losses near the end of the year as a strategy to offset capital gains and reduce taxes on profits.

If losses are large enough, investors may be able to offset capital gains taxes for the year.

Interest income

With certain types of investments, such as cash-equivalent accounts, you will likely be responsible for paying taxes on interest income.

Generally, at the end of the year, the financial institution will send an IRS Form 1099-INT with the details needed to file tax returns.

Exceptions may include tax-advantaged accounts and some tax-exempt bonds.