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Whether you're just starting out on your own, in the middle of your career, approaching retirement age, or in the midst of your golden years, this means you've begun to think about your financial future, and how you might prudently manage your capital so that it can work for you. Nobody starts out an expert, and even the best investors in the world were once sitting where you are. Let's start with two basic questions: Where should you begin? How do you begin? Those two inquiries might seem daunting, especially if you've encountered the array of intimidating investing terms — like price to earnings ratio (p/e ratio), market capitalization , and return on equity . But getting started with investing isn't as scary as it might seem. The First Investing Step Is Figuring Out Which Types of Assets You Want to Own Let's start with this basic truth: At its core, investing is about laying out money today with the expectation of getting more money back in the future — which, accounting for time , adjusting for risk , and factoring in inflation , results in a satisfactory compound annual growth rate , particularly as compared to standards considered a "good" investment . That's really it; the heart of the matter. You lay out cash or assets now, in the hope of more cash or assets returning to you tomorrow, or next year, or next decade. Most of the time, this is best achieved through the acquisition of productive assets . Productive assets are investments that internally throw off surplus money from some sort of activity. For example, if you buy a painting, it isn't a productive asset. One hundred years from now, you'll still only own the painting, which may or may not be worth more or less money. (You might, however, be able to convert it into a quasi-productive asset by opening a museum and charging admission to see it.) On the other hand, if you buy an apartment building, you'll not only have the building, but all of the cash it produces from rent and service income over that century. Even if the building were destroyed after a decade, you still have the cash flow from ten years of operation — which you could have used to support your lifestyle, given to charity, or reinvested into other opportunities. Each type of productive asset has its own pros and cons, unique quirks, legal traditions, tax rules, and other relevant details. Broadly speaking, investments in productive assets can be divided into a handful of major categories. Let's walk through the three most common kinds of investments: Stocks, bonds, and real estate. Investing in Stocks When people talk about investing in stocks, they usually mean investing in common stock, which is another way to describe business ownership, or business equity. When you own equity in a business, you are entitled to a share of the profit or losses generated by that company's operating activity. On an aggregate basis, equities have historically been the most rewarding asset class for investors seeking to build wealth over time without using large amounts of leverage. At the risk of oversimplifying, I like to think of business equity investments as coming in one of two flavors — privately held and publicly traded. Investing in Privately Held Businesses: These are businesses that have no public market for their shares . When started from scratch, they can be a high-risk, high-reward proposition for the entrepreneur. You come up with an idea, you establish a business, you run that business so your expenses are less than your revenues, and you grow it over time, making sure you are not only being well-compensated for your time but that your capital, too, is being fairly treated by enjoying a good return in excess of what you could earn from a passive investment. Though entrepreneurship is not easy, owning a good business can put food on your table, send your children to college, pay for your medical expenses, and allow you to retire in comfort. Investing in Publicly Traded Businesses: Private businesses sometimes sell part of themselves to outside investors, in a process known as an Initial Public Offering, or IPO . When this happens, anyone can buy shares and become an owner. The types of publicly traded stocks you own may differ based on a number of factors. For example, if you are the type of person that likes companies that are stable and gush cash flow for owners, you are probably going to be drawn to blue-chip stocks , and may even have an affinity for dividend investing , dividend growth investing , and value investing . On the other hand, if you prefer a more aggressive portfolio allocation methodology, you might be drawn to investing in the stock of bad companies , because even a small increase in profitability could lead to a disproportionately large jump in the market price of the stock. Investing in Fixed-Income Securities (Bonds) When you buy a fixed income security, you are really lending money to the bond issuer in exchange for interest income . There are a myriad of ways you can do it, from buying certificates of deposit and money markets to investing in corporate bonds , tax-free municipal bonds , and U.S. savings bonds . As with stocks, many fixed-income securities are purchased through a brokerage account. Selecting your broker will require you to choose between either a discount or full-service model . When opening a new brokerage account, the minimum investment can vary, usually ranging from $500 to $1,000; often even lower for IRAs, or education accounts. Alternatively, you can work with a registered investment advisor or asset management company that operates on a fiduciary basis . Investing in Real Estate Real estate investing is nearly as old as mankind itself. There are several ways to make money investing in real estate , but it typically comes down to either developing something and selling it for a profit, or owning something and letting others use it in exchange for rent or lease payments. For a lot of investors, real estate has been a path to wealth because it more easily lends itself to using leverage. This can be bad if the investment turns out to be a poor one, but, applied to the right investment, at the right price, and on the right terms, it can allow someone without a lot of net worth to rapidly accumulate resources, controlling a far larger asset base than he or she could otherwise afford. Something that might be confusing for new investors is that real estate can also be traded like a stock. Usually, this happens through a corporation that qualifies as a real estate investment trust, or REIT . For example, you can invest in hotel REITs and collect your share of the revenue from guests checking into the hotels and resorts that make up the company's portfolio. There are many different kinds of REITs; apartment complex REITs, office building REITs, storage unit REITs, REITs that specialize in senior housing, and even parking garage REITs. The Next Investing Step Is to Decide How You Want to Own Those Assets Once you've settled on the asset class you want to own, your next step is to decide how you are going to own it. To better understand this point, let's look at business equity. If you decide you want a stake in a ...