7 Ways to Invest Your Money in 2025
No one has time to sort through dozens of bank account options to find the best way to maximize your savings. That’s where DepositAccounts comes in: We’ll comb through our database to produce a handful of choices for you to consider. We even include pros and cons for all options. Now the choice is yours.
Find the best ways to invest your money
Whether you want to grow your retirement nest egg, fund your children’s college education or finance a major purchase, saving and investing can help you reach your goals. However, the right option for you will depend on your timeline and your risk tolerance.
Here are seven strategies for investing that suit various goals and risk levels.
1. High-yield savings accounts
Putting money into a high-yield savings account isn’t technically considered investing, but this type of account earns an above-average interest rate compared with a traditional savings account. The money you keep in a high-yield savings account is easily accessible and is typically covered by FDIC insurance, making it a safe way to store and grow cash.
Who is it best for? High-yield savings accounts might be best for individuals with short-term financial goals or for those who prefer their investments to be highly liquid, or easily converted to cash. They are useful for storing emergency savings or for people who prefer low risk and stability.
Where can you open a high-yield savings account? You can open high-yield savings accounts at banks and credit unions, but keep in mind that online banks typically offer the most competitive accounts.
What are the disadvantages? High-yield savings accounts earn above-average rates, but riskier investments, such as stocks, can have greater overall return potential.
View our list of high-yield savings accounts.
2. Certificates of deposit (CDs)
A certificate of deposit (CD) is a safe place to store cash for short- and medium-term goals. Your CD rate is guaranteed for a specific period of time, called a term, which can range from a few months to several years. However, you usually must keep your cash locked away for the entire term or risk having to pay an early withdrawal penalty.
Some people choose to build a CD ladder, which involves spreading your money across multiple CDs with different maturity dates. This allows you to take advantage of rising interest rates and maintain access to your funds at regular intervals.
As with savings accounts, CDs are typically covered by FDIC insurance.
Who is it best for? CDs might be best for investors who want to earn a reliable return with low risk.
Where can you open a CD? CDs are available at various financial institutions, including traditional brick-and-mortar banks, online banks and credit unions.
What are the disadvantages? The main disadvantage of a CD is the early withdrawal penalty, which generally equals a certain number of months’ interest. Still, some banks offer no-penalty CDs, although those often come with a lower rate.
View our list of CDs.
3. Money market funds
Money market funds (not to be confused with money market accounts) invest in short-term debt securities, such as Treasury bills. Money market funds are considered a safer investment than stocks, as they primarily invest in low-risk, short-term debt products.
Who is it best for? Money market funds might be best for investors who are looking for a relatively safe investment that is highly liquid.
Where can you open a money market fund? You can open a money market fund at a brokerage firm or bank.
What are the disadvantages? Your returns might be lower compared with riskier options, such as stocks.
4. Bonds
When you buy a bond, you’re essentially lending money to a company or government. In return, you’ll receive your money back on a set date as well as regular interest payments: typically twice a year. Government bonds are generally considered to be safer investments than corporate bonds because they’re backed by the federal government.
Who is it best for? Bonds might be best for investors who want stability and reliable income.
Where can you buy bonds? You can purchase bonds through brokerage firms, including Fidelity, Vanguard and Charles Schwab. You can also buy government bonds directly through TreasuryDirect.
What are the disadvantages? Bonds have limited growth potential compared with some higher-risk investments. The value of your bond may decline when interest rates rise. Inflation may also eat into the value of interest payments.
5. Stocks
When you buy a company’s stock, you are purchasing a partial ownership share. As the company’s value rises or falls, so does the stock’s value. Stocks are considered a risky investment because they are tied to a company’s performance and can be affected by broader events, such as financial crises and recessions.
Who is it best for? Stocks might be best for investors who are willing to take on more risk for the possibility of a higher reward.
Where can you buy stocks? Similar to bonds, stocks can be purchased through brokerage firms, such as Fidelity, Vanguard or Charles Schwab.
What are the disadvantages? Stocks are volatile investments. Historically, the stock market has earned greater returns than other types of investments, but you could still lose money, especially in the short term.
6. Index funds
Index funds are designed to track the performance of a specific market index, such as the S&P 500. An index fund is generally considered a “passive” investment, as it aims to mirror an index versus trying to beat the market through investing in stocks or managed funds.
Index funds are also a diversification tool because each fund includes a collection of hundreds if not thousands of stocks and bonds, depending on the index it’s tracking.
Who is it best for? Index funds can be a good option for beginners or investors who want to take more of a “set it and forget it” approach.
Where can you buy index funds? You can buy index funds through brokerage firms, such as Fidelity, Vanguard or Charles Schwab.
What are the disadvantages? You’ll have less control over managing your investments, which can be an issue for investors who prefer a hands-on approach.
7. Exchange-traded funds (ETFs)
Like an index fund, an exchange-traded fund (ETF) is an investment that typically tracks a specific index and is bought and sold on a stock exchange. An ETF generally holds a collection of assets, including stocks, bonds and other securities. The key difference between an ETF and an index fund is that ETFs are traded in the same way that stocks are, meaning you can buy and sell them during market hours.
Who is it best for? ETFs might be best for investors who want to build diversified portfolios and who want to be able to buy and sell their funds as they would stocks.
Where can you buy ETFs? You can buy ETFs through a brokerage firm, such as Fidelity, Vanguard or Charles Schwab.
What are the disadvantages? ETFs present short-term market risk.
Questions to consider before investing
Before you start investing, it’s important to consider a few key questions. Taking the time to reflect can help set you up for the best chance of success.
What is your investing experience?
Your level of investing experience can help determine which investment options are the most suitable for you. For example, beginners may want to consider investments that are fairly easy to manage, such as CDs. Seasoned investors, on the other hand, might be ready for more complex investments, such as stocks and bonds.
If you’re a new investor or just want to brush up on the basics, here are a few resources to broaden your knowledge:
- FINRA’s investing basics page
- Securities and Exchange Commission (SEC) website
- Investor.gov (part of the SEC)
What is your risk tolerance?
Your risk tolerance is how much risk you’re willing to “tolerate” with your investments. For example, if you have a conservative risk tolerance, you may prefer lower-risk options, such as savings accounts, CDs and government bonds. On the other hand, aggressive investors are willing to take on riskier investments to earn bigger returns over time.
Many investors fall somewhere in between, preferring a balanced approach with a mix of both low- and high-risk investments.
Your risk tolerance can also depend on your age. If you’re younger, you may be more comfortable with risk because you have more time to recover from potential losses. But if you’re nearing retirement, you may prefer more conservative investments.
What is your time horizon?
Time horizon is a fancy term that means, “When do you need the money?” For example, are you saving money to pay for a down payment on a home five years down the line? Or are you investing toward a retirement that’s 10, 20 or even 30 years in the future?
Your timeline plays a major role in your investment strategy. For short-term goals, you might look toward lower-risk vehicles, such as savings accounts and CDs. You may be more comfortable with riskier investments, like stocks, for longer-term goals.