Asset Classes Made Simple (No Jargon)
Where to Invest - A Simple Guide
If you want to grow your money but don’t know where to start, you’re not alone. This guide explains the six main types of assets that ordinary people like you and me invest in: real estate, gold, stocks, ETFs, bonds and Bitcoin.
You’ll learn
- what they are
- why they have value
- how risky they are and
- how you can buy them - without needing a financial advisor or expensive middlemen.
This is for you if you’re completely new to investing and want to feel confident about taking that first step.
Investing vs. trading: what’s the difference?
First, let us look at what investing is - and what it is not. One of the biggest confusions beginners have is mixing up investing and trading. In my experience, most of the fear comes from this confusion.
You picture sweaty guys in light blue shirts on the floor of Wall Street staring at seven screens and yelling into their phones. Yeah, that is trading. This is not what we do. Investing is luckily much less nerve-wrecking.
Investing means putting your money into assets (like stocks, ETFs or real estate) and holding them for the long term - often 5, 10, or 20+ years. You let time, growth and compounding work for you and adjust a few things here and there, maybe once a year. This takes time, a little bit of skill, access to simple investment platforms and patience.
Trading means buying and selling often - sometimes within days, minutes or even seconds - trying to profit from small price changes. It is risky, requires constant monitoring of markets and very quick decision-making. This takes time, skill, access to special trading tools and nerves of steel.
This article is about investing. It’s simpler, much less stressful and proven to build wealth over time.
First, let us look at what investing is - and what it is not. One of the biggest confusions beginners have is mixing up investing and trading. In my experience, most of the fear comes from this confusion. You picture sweaty guys in light blue shirts on the floor of Wall Street staring at seven screens and yelling into their phones. Yeah, that is trading. This is not what we do. Investing is luckily much less nerve-wrecking.
Investing means putting your money into assets (like stocks, ETFs or real estate) and holding them for the long term - often 5, 10, or 20+ years. You let time, growth and compounding work for you and adjust a few things here and there, maybe once a year. This takes time, a little bit of skill, access to simple investment platforms and patience.
Trading means buying and selling often - sometimes within days, minutes or even seconds - trying to profit from small price changes. It is risky, requires constant monitoring of markets and very quick decision-making. This takes time, skill, access to special trading tools and nerves of steel.
This article is about investing. It’s simpler, much less stressful and proven to build wealth over time.
Historical context
For as long as people have created wealth, they’ve looked for ways to protect and grow it. This is at the core of any investment.
Real estate has been a symbol of stability for centuries.
Gold was money before we had paper money.
Stocks and bonds grew with modern economies as companies and governments raised funds by issuing shares of their company.
ETFs (Exchange Traded Funds) came up in the early 1990s as a way for ordinary people to access diversified investments cheaply.
Bitcoin was started in 2009 as a digital, borderless and government-independent alternative to gold - by Satoshi Nakamoto, its unknown founder (or group of founders).
Some truth bombs
You don’t need to be rich or a math genius to invest - common sense goes a long way.
You don’t need permission or to “wait until you know everything” - fundamental understanding of the basics is enough to get started.
Time is your biggest friend - the earlier you start, the better.
As Warren Buffett likes to say:
"Time in the market always beats timing the market."
Common misunderstandings
“Investing is only for rich people.” → No. Absolutely not. You can literally start with as little as 25 EUR. You do not need a large amount to start.
“It’s too risky.” → Not if you have a strategy that matches your life, risk tolerance and goal. Not investing at all is risky, your cash loses value to inflation every single year.
“I need an advisor to start.” → No, you probably don’t. Banks and apps let you buy assets yourself.
How your strategy shapes your choice of assets
Before you look at different types of assets, the first question is: What’s your plan?
Your plan is very much defined by your goal. Here’s how you define your goal in very simple terms:
How much money would you like to have or do you think you need in X years?
For example, if you need 2,500 EUR per month to cover all your costs comfortably when you retire in 20 years, you’ll have to find out how much pension you will likely get, in case you paid into any kind of pension fund, and how big the gap is between this amount and the target amount you would need to cover your costs. This is the scenario for most people.
If you would like to retire early and live off of the dividends or yield of your assets and you have much higher fixed costs, this might require a very different strategy.
How do I find the right strategy for me?
A strategy is balanced between risk, return and time.
And, as it is often in life, you typically can’t have it all at once. If you want low risk and high returns, you’ll need a lot of time. If you’d like to see high returns in a short amount of time, you’ll have to accept a much higher risk.
Your choice of assets depends on:
How long you want to invest. (Short-term? Long-term? How many years is “short-term” and “long-term”? How old are you? At what age are you planning to retire etc.?)
How much risk you can or want to handle. (Can you sleep at night if your investments go up and down? Are you single or do you have dependents that count on you as the provider?)
Your goal. (Steady additional income for retirement? Wealth growth? Safety in tough times?)
Example strategies:
Long-term growth: A focus could be on stocks of established companies, maybe mix in some “growth stocks” of companies that are new, but are growing rapidly, large ETFs that follow global markets and buy some Bitcoin.
Safety first: Include more bonds, gold, fixed-term deposits (like certificates of deposit) and maybe real estate (via ETFs if direct property is too costly).
A little of everything: Combine stocks, bonds, gold, Bitcoin and real estate ETFs.
Important to know: You can mix and match all asset classes.
You don’t have to pick just one asset class. And you can also have multiple stocks, i.e. stocks of different companies, and different ETFs as well. ETFs can represent different industries, niches, geographical regions etc.
You can make one-time investments or invest small amounts every month or combine a bigger amount at the beginning with small, regular payments.
If you have - say - 50,000 EUR / USD available for investment, you could split them up into different asset classes, either evenly or in different proportions.
And additionally, you can invest smaller amounts regularly, e.g. monthly, into ETFs or stocks etc. This helps benefitting from the compound effect.
Three Golden Rules For Beginner Investors
#1 Emergency Fund
Before you start investing, you should have an emergency fund. An emergency fund is money that you don’t touch, but that you can access easily when push comes to shove. When your car breaks down, the washing machine needs to be replaced, you lose your job and you need to bridge a few months or you break up with your partner and want to move out, buy new furniture etc. All the things we don’t want to happen, but do happen unfortunately. And they typically cost money.
The amount varies depending on your situation and fixed costs, so it is a bit hard to give you a number, but for most people it would probably be a minimum of 10,000 EUR / USD. If you’ve got that covered, you can think about investing any money exceeding that amount.
#2 If You Can’t Afford to Leave It, Don’t Invest It
You should only ever invest money that you don’t need in the foreseeable future, depending on your goal. If you would like to grow your portfolio over 20 years, you should plan your life in a way that you don’t need to sell any of these assets. Plan monthly investments accordingly. You should comfortably be able to use that amount every month (you can always adjust, but plan with a minimum amount to benefit from the compound effect).
#3 Pay Yourself First
If you have your emergency fund and you made a plan to invest a certain amount of your income monthly, make sure this amount is available every month by tucking it away immediately every month whenever money comes in. Either your paycheck arrives, you pay yourself etc. If the money is gone, e.g. to a separate account, you won’t miss it and - most importantly - you can’t spend it otherwise.
Real-world examples of asset classes
Okay, now let’s look at all the options you have to invest in, the asset classes. There are more than these, but these are the ones that are most suitable for the regular (retail) investor like you and me. And it’s really not that many.
Real estate
What is it?
Real estate means owning property - like a house, apartment, or commercial building - that can grow in value over time and provide rental income.
Real estate is probably the most known asset class, even though a lot of people may not even think of it as an investment - just as something you do at some point in your life. It’s the one that requires the most money upfront. Most people buy a house to live in once in their lives, so they don’t have to pay rent when they retire. Some think about selling it later in life (and hopefully with profit) when they may need a smaller home and want to downsize. Or they buy a vacation home with the plan of selling it one day. But a lot of people also buy real estate to rent it out and live off of that rent.
Best for: Long-term stability, wealth preservation
Risk: Medium to high (property values can drop, maintenance costs, hard to sell fast, it is not a very liquid asset)
Why it has value: People always need places to live or work, there will most likely always be demand for housingHistorical return: ~3-4%/year (can of course be much higher or lower depending on location)
How to buy: Direct property purchase (expensive, can be complex) or - a lesser known option - real estate ETFs via your bank or a trading app. Real estate ETFs let you participate in the growth of certain housing markets without buying property yourself.
Gold
What is it?
Gold is a precious metal that people have trusted for thousands of years as a safe store of value, especially during economic uncertainty.
Best for: Wealth protection in uncertain times
Risk: Low to medium (price can swing but gold holds long-term value, safe storage needs to be taken care of)
Why it has value: Trusted as a store of value around the world
Historical return: ~1-2% above inflation
How to buy: Physical gold (coins, bars can be bought at jewelry stores, gold dealers or precious metal shops, in some countries, banks also sell gold)
Stocks
What is it?
Stocks are small pieces of ownership in a company. When you buy a stock, you become a part-owner and can benefit if the company does well (and share a piece of the risk if not).
Best for: Long-term growth
Risk: Medium to high (depends on the industry and the company, prices can fall, but long-term returns are typically strong)
Why it has value: You own part of a company and benefit from its profits
Historical return: ~6-8%/year over decades
How to buy: Through your (online) bank with a separate investment account or platforms like Scalable Capital or Trade Republic.
ETFs (Exchange-Traded Funds)
What is it?
ETFs are funds that usually hold a basket of real stocks, bonds, or other assets to track an index. They let you easily buy a wide mix of investments in one simple package, at low cost.
Best for: Beginners wanting easy diversification and long-term growth
Risk: Varies (depends on the ETF, its size, the industry etc,)
Why it has value: A basket of many stocks/bonds in one package
Historical return: Matches what’s inside (e.g. stock ETFs ~6-8%/year)
How to buy: Via a bank platform, e.g. your own (online) bank with a separate investment account or apps like Trade Republic, Scalable Capital.
How is owning an ETF different from owning a stock?
When you buy a stock, you own a direct piece of that specific company. For example, if you buy Apple stock, you are a small part-owner of Apple. You have shareholder rights, like voting at their annual meeting (even if you own just one share).
When you buy an ETF, you own shares in the fund - not in the companies the ETF holds. The fund itself owns the stocks (or tracks them, in the case of synthetic ETFs), and you own a piece of the fund. This means:
You don’t have direct shareholder rights in the individual companies.
You benefit from the overall performance of the basket of companies, but you’re one step removed.
Think of it this way:
A stock is like owning a slice of a single cake. An ETF is like owning a slice of a giant platter that holds many small cakes.
Bonds
What is it?
Bonds are loans you give to governments or companies. In return, they pay you interest until they give you back the original amount.
It is the least typical investment for retail investors, only 2-3% of people in the US and Europe own bonds directly. It is usually an asset class for institutional investors like insurers, pension funds or banks. Bond ETFs are a bit more common and work in the same way that stock ETFs work. I include it here for the sake of completeness, but for most retail investors, this is usually not the most interesting option.
Best for: Steady (but low) returns, income
Risk: Low to medium (depends on issuer)
Why it has value: You lend money to a government and get paid interest in return
Historical return: ~1-3%/year on average (depending on the term of investment)
How to buy: Direct bonds (a bit complex for beginners and minimum investments are typically high, but can be bought via your bank) or bond ETFs which can be bought via investment platforms, apps or your bank.
Bitcoin
Bitcoin is digital money, a so-called cryptocurrency, with a fixed supply that is independent of banks or governments. Some people see it as “digital gold” for the internet age.
A big misconception that I hear often is that you have to buy “one Bitcoin”, i.e. a whole coin. Bitcoin trades at ca. 107,000 USD at the time of writing - which would be quite expensive. The good thing is that you can buy small fractions of Bitcoin (“sats” - short for Satoshis, named after Satoshi Nakamoto, the unknown founder of Bitcoin are the pennies or cents of Bitcoin so to speak), e.g. you can buy 100 EUR worth of Bitcoin so that you would end up owning ca. 0,001 Bitcoin.
Best for: Digital wealth storage, speculative growth
Risk: Medium to high (prices can swing dramatically)
Why it has value: Fixed supply, no government control
Historical return: ~ 145%/year, i.e. extremely high so far (but very volatile, crashes of 70-90% happen!)
How to buy: Platforms like Coinbase or Kraken or through bank-affiliated crypto services, investment apps like Trade Republic or Scalable Capital also let you buy crypto-currencies like Bitcoin.
Personal relevance - especially for women
Many women hesitate to invest because they feel they don’t know enough or fear making a mistake. But here’s the truth:
You don’t have to know everything to start.
Starting small is smart and totally okay.
The most powerful move is to take that first step.
Think of investing like planting a tree. You don’t need to understand the chemistry of soil - you need to choose a plant that fits into your life, then plant the seed and water it over time. And yes, you can absolutely do this yourself. No need for a gardener.
“People don’t copy me, because nobody wants to get rich slowly.”
Final thoughts: What investing looks like in real life
Investing doesn’t have to be complicated or scary. You’ve now seen how different asset classes work, why they have value, and how you could buy them if you would like to start - without middlemen or the need to understand fancy jargon.
Most investing will be done via 2 or 3 trustworthy platforms or apps, just like you do with your bank (or you might even have your investment account at your bank).
You register, do the KYC, answer some questions about your experience and then send money to this account, typically via a connection to your main bank account, research what to invest in (I’ll cover the stock market and ETF jungle in a separate article) and hit the button to buy the amount of the asset you picked.
And then you mostly just wait and let your money and the economy work for you. It is actually pretty boring once you get past the first excitement. It is definitely nothing to be super scared about.
If you read this far, you have the first basic understanding of what your options are. And that’s already more than most people know. So congratulations, you are doing everything right!
Key terms defined
Asset class: A group of similar types of investments (e.g., stocks, bonds)
Risk: The chance your investment loses value
Return: How much your investment grows over time
ETF: A fund holding many investments, traded like a stock
Diversification: Spreading your money across different assets to lower risk
If you’d like to go deeper, sign up for the waitlist for “Mystery Money” - where I cover all of this in much more depth and help you make your first steps with confidence and a new relationship with money.
Learn more about the course here or sign up for the waitlist here (and get 20% discount once the course is available - no need to pay now!).
DISCLAIMER
All content provided in this article is for informational and educational purposes only. Nothing in this content should be interpreted as financial, investment, legal or tax advice.
I am not a financial advisor, and no part of this material constitutes a recommendation to buy, sell or hold any financial product, any particular asset or security. You are solely responsible for your own financial decisions. Please consult a qualified professional before making any financial choices.
