It doesn’t matter what you invest in or where you put your money, there are four main asset classes that make up all savings and investment products. Once you’ve cracked this principle making the most of your money will be a lot simpler.

Cash

The ‘cash’ asset class refers to the money that is invested with banks, building societies and other companies, with the aim of gaining interest. The most common form of ‘cash’ is a savings account.

This is the least risky of the asset classes, but an investor runs the risk that their investment won't keep pace with inflation.

Fixed interest

Fixed interest investments are often known as bonds and come in all shapes and sizes. A fixed-interest security is a loan, either to a company (corporate bond) or to the Government (gilt). They are considered more risky than cash but less risky than other asset classes. In return for money the company or government will pay interest until the end of the loan when you will get your money back.

There’s a risk with bonds that you won’t get your money back at all, if the company issuing them gets into financial difficulties. That risk is low for some companies but higher for others, but the risk is always there. As a broad rule of thumb bonds are graded to help determine which ones are more likely to repay the loan.

Property

As an asset class, property usually refers to commercial property, such as shops, offices and retails parks, and property related shares.

There is more to property as an asset than simply the rising (or falling) prices of buying and selling. Commercial property can provide an income through its tenants, and the management of a commercial property (i.e. maintenance and refurbishment) which can be crucial to providing a return.

Property can also act as an important diversifier in your portfolio if you do not already have a significant proportion of your investment in property. This is because it tends to react differently to market conditions than bonds and equities do. However it can take time to sell a property so there may be delays in investors getting their money back. The value of a property is often just the valuer's opinion of how much it is worth and there is always the risk that your investment, and any income, can go down as well as up.

Equities

Also known as stocks and shares, these are part of a company's stock capital and are traded on the stock exchange in this country and around the world. There are a number of factors that can affect the value of shares, for example, when the profits of the company go up, so usually does the share price. If things are going badly, the share price will usually fall. The price changes all the time, sometimes minute by minute.

This is the most risky asset class as there is the potential for high losses if the company folds. There is also the potential for high returns if the company does really well.