Investing is the finest method to increase your money when done safely, and most forms of investments are available to almost anybody, regardless of age, income, or job. Such variables, however, will affect which assets are ideal for you at this time.
Someone nearing retirement with a substantial nest fund, for example, will most certainly have a completely different investing strategy than someone just starting out in their career with no savings to speak of. Neither of these persons should forgo investing; instead, they should select the greatest assets for their specific circumstances.
Here are the top 12 assets to consider, listed in descending order of risk from lowest to greatest. Keep in mind that reduced risk usually equates to poorer rewards.
12 Best Investments
1. High yield savings accounts
2. Certificate of deposits
3. Money market funds
4. Government bonds
5. Corporate bonds
6. Mutual funds
7. Index funds
8. Exchange-Traded Funds (ETFs)
9. Dividend stocks
10. Individual stocks
11. Alternative investments and cryptocurrencies
12. Real Estate
1. High yield savings accounts
Online savings and cash management accounts provide greater rates of return than traditional bank savings or checking accounts. Cash management accounts are a cross between a savings account and a checking account: They may provide interest rates comparable to savings accounts, but are generally offered by brokerage firms and may include debit cards or check cards.
Best for: Savings accounts are ideal for short-term savings or money that has to be accessed only on occasions, such as an emergency or vacation fund. Cash management accounts provide greater flexibility and, in certain circumstances, higher interest rates.
If you’re new to saving and investing, a reasonable rule of thumb is to maintain three to six months’ worth of living costs in an account like this before committing more to the investment products listed further down on this list.
Where to create a savings account: Because of fewer administrative expenses, internet banks typically offer greater rates than traditional banks with physical offices.
Where to create a cash management account: Investment firms and robo-advisors such as Betterment and SoFi provide competitive cash management account rates.
2. Certificates of deposit
A CD is a savings account that is federally guaranteed and offers a fixed interest rate for a certain period of time.
Best for: A CD is best for money that you know you’ll need at some point in the future (e.g., a home down payment or a wedding). CDs often have terms of one, three, or five years, so if you’re looking to securely grow your money for a specific purpose within a specified time period, CDs might be a suitable alternative.
It’s worth noting, though, that if you want to get your money out of a CD early, you’ll almost certainly have to pay a charge. Don’t buy a CD with money you might need soon, just like you wouldn’t buy other forms of investments.
Where to buy: CDs are offered based on term length, and the greatest rates are typically obtained through online banks and credit unions. See the current top CD rates depending on term duration and account minimums.
3. Money market funds
When you invest in a money market fund, you are purchasing a portfolio of high-quality, short-term government, bank, or corporate debt.
Best for: You have money that you may need soon and are prepared to expose to a bit greater market risk. Money market funds are also used by investors to store a portion of their portfolio in a safer investment than equities, or as a holding pen for money set aside for future investment
Where to buy a money market mutual fund: Money market mutual funds can be acquired directly from a mutual fund provider or a bank, but an online discount brokerage (you’ll need to create a brokerage account) will have the most diverse choices.
4. A government bond
A government bond is a loan made by you to a government body (such as the federal or local government) that pays investors interest over a defined period of time, generally one to 30 years. Bonds are classified as a fixed-income instrument due to their consistent stream of payments. Government bonds are essentially risk-free investments since they are guaranteed by the full faith and credit of the United States.
Best for: Conservative investors who want their portfolio to be less volatile.
Bonds are popular among investors nearing or already in retirement because to their stable income and decreased volatility, as these individuals may not have a long enough investment horizon to weather unexpected or severe market falls.
Where to buy govt bonds: Individual bonds or bond funds, which hold a variety of bonds for diversification, can be purchased through a broker or directly from the underwriting investment bank or the United States government. Our primer on how to invest in bonds will help you decide which kind to buy and where to buy them.
5. Corporate bonds
Corporate bonds work in the same way as government bonds, with the distinction that you are lending to a business rather than the government. As a result, because these loans are not government-guaranteed, they are a riskier option. And if it’s a high-yield bond (also known as a trash bond), they can be far riskier, with a risk/return profile more comparable to stocks than bonds.
Best for: Investors seeking a fixed-income product with possibly greater returns than government bonds who are ready to accept a bit more risk in exchange. The higher the yield on corporate bonds, the greater the probability that the company will fail. Bonds issued by large, reliable corporations, on the other hand, would usually have a lower yield. Bonds issued by large, reliable corporations, on the other hand, would usually have a lower yield. It is the investor’s responsibility to determine the risk/return balance that works best for them.
Where to acquire corporate bonds: Corporate bond funds or individual bonds can be purchased through an investment broker, much like government bonds.
6.Mutual funds
mutual fund pools investor funds to purchase stocks, bonds, or other assets. Mutual funds provide investors a low-cost way to diversify — to spread their money over several investments — in order to hedge against the losses of a single investment.
Best for: If you’re saving for retirement or another long-term goal, mutual funds are a straightforward way to obtain exposure to the stock market’s greater investment returns without having to buy and manage individual stocks.
Mutual funds can be acquired directly from the companies that manage them, as well as via cheap brokerage firms.
Where to buy mutual funds: Almost all of the mutual fund providers we investigated offer no-transaction-fee mutual funds (no commissions) as well as tools to help you pick funds.
Best for : Index mutual funds are among the greatest investments available for long-term financial goals. Index mutual funds are less volatile than actively managed funds that aim to outperform the market, in addition to being less expensive due to reduced fund management fees.
7. Index funds:
Mutual funds can be acquired directly from the companies that manage them, as well as via cheap brokerage firms. Almost all of the mutual fund providers we investigated offer no-transaction-fee mutual funds (no commissions) as well as tools to help you pick funds.
Best for: These are among the best long-term financial investments accessible. Index mutual funds are less volatile than actively managed funds that seek to beat the market, and they are also less expensive owing to lower fund management fees.
Index funds are particularly well-suited for young investors with a long time horizon, as they may devote more of their portfolio to higher-returning stock funds rather than more conservative options like bonds.
Where to buy index funds: Index funds can be purchased directly from fund providers or via a discount broker. See our page on how to invest in index funds for more information.
8. Exchange-Traded Funds
ETFs, like mutual funds, aggregate client funds to purchase a selection of assets, resulting in a single diversified investment. The distinction is in how they are sold: ETFs are purchased by investors in the same way that individual stocks are.
Best for : ETFs, like index funds and mutual funds, are best suited for investors with a lengthy time horizon. Aside from that, ETFs are great for investors who do not have enough money to fulfill the minimum investment criteria for a mutual fund because the share price of an ETF may be lower than the minimum for a mutual fund.
Where to Buy ETFs: ETFs, like stocks, have ticker symbols and are available through cheap brokerages. (For a list of the top brokers for ETF investing, see our roundup.) ETFs are also used by robo-advisers to build client portfolios.
9.Dividend stocks
Dividend stocks may provide both stable incomes like bonds and growth like individual stocks and stock funds. Dividends are regular financial payments made by corporations to shareholders, and they are frequently associated with stable, prosperous businesses. While the share prices of certain dividend stocks may not climb as rapidly or as high as those of growth-stage businesses, they might be appealing to investors due to the income.
Best for: Any investor, from novice to retiree, however, certain types of dividend stocks may be preferable depending on where you are in your investment journey.
Where to Buy Dividend Stocks: As with the other stocks on our list, the simplest method to purchase dividend stocks is through an internet broker. For additional information, see our piece on high-dividend stocks and how to invest in them.
10. Individual stocks
A stock is a share of a company’s ownership. Stocks provide the largest possible return on investment while exposing your money to the most volatility.
These words of warning are not intended to frighten you away from stocks. Rather, they are intended to point you in the direction of the diversity that buying a group of companies through mutual funds provides, as opposed to buying individual stocks.
Best for: Diversified portfolio investors that are ready to take on a bit extra risk. Due to the volatility of individual stocks, investors should restrict their individual stock holdings to 10% or less of their total portfolio.
Where to buy stocks: An online discount broker is the simplest and least costly method to buy stocks. After you create and fund an account, you will be able to select your order type and become a legitimate shareholder.
11 Alternative investments
If you aren’t investing in the above-mentioned stocks, bonds, or cash equivalents, there’s a high probability your investment is in the alternative assets category. Bitcoin and Ethereum are examples of cryptocurrencies, as are gold and silver, private equity, hedge funds, and even coins, stamps, wine, and art.
Best for: Investors (many of whom are accredited investors) want to diversify away from traditional assets and hedge against stock and bond market downturns.
Where to acquire alternative investments: While some internet brokers provide access to some alternative investments, the majority of alternatives are exclusively available through private wealth management businesses. However, there are ETFs that track the asset itself as well as firms connected to the asset, such as gold and private equity ETFs (such as gold mining and refining companies).
12. Real estate
Traditional real estate investment is purchasing a property and later selling it for a profit, or purchasing a property and collecting rent as a source of fixed income. However, there are a number of alternative, considerably less hands-on methods to invest in real estate.
Best for: Investors that currently have a well-diversified investment portfolio and want to diversify more, or who are prepared to take on greater risk in order to achieve higher returns. Because real estate investments are very illiquid, investors should not put money into them that they will need to access soon.
How to Invest in Real Estate: Some REITs are available on the public stock market via an online stockbroker, while others are only available in private marketplaces. Similarly, some crowdfunding sites are exclusively available to accredited investors, but others do not limit who can invest.
How to select the Best Investments
Building money through the above-mentioned assets can begin at any age and income level. The goal is to select the best investments for you based on the following criteria:
Your timeline. Money set aside for immediate needs should be immediately accessible and invested in a secure and reliable manner. You have greater freedom to invest in m for long-term goals.
Your willingness to take risks. The more risk you are prepared to accept by exposing your money to the stock market’s short-term fluctuations, the greater the potential long-term reward. Spreading your money across several sorts of assets will help to smooth out your investment results.
How much money do you have? Some investments demand a minimum balance or an initial investment. However, if you know where to search, you may find solutions and suppliers that can suit most investment budgets.
How much assistance do you require. Many of the investments outlined above are available to DIY investors by opening a brokerage account; if you’re unsure which investments are best for your situation, you can hire a low-cost, automated service known as a Robo-advisor to build an investment portfolio for you based on the criteria outlined above. Savings accounts, for example, are a type of short-term investment that may be created at a bank.
