12 Best Investments To Buy Now
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Your investment options go far beyond just stocks. And many types of investments are accessible to anyone regardless of age, income or career.
Someone close to retirement with a healthy nest egg will likely have a very different investment plan than someone just starting out in their career with no savings. Neither of these individuals should avoid investing. But they should choose the best investments for their individual circumstances.
Is today a good time to start investing?
Yes, if you’re invested for the long haul. Certain things going on with today’s market are unique to history and that’s not going to last forever. If you’re a long-term investor, it’s normal to worry about your investments, especially in a year that has seen major drops in both the stock and bond markets.
Getting into investing at a time of such volatility can feel scary. Nevertheless, you need to take an investment approach that's appropriate for your particular financial situation, time horizon, and features the right asset allocation for you.
This implies you won’t miss out on any potential recovery. Short-term lows in the stock and bond markets due to factors such as global unrest, a pandemic and inflation, shouldn’t keep you from investing if you’re diversified across a range of assets and have a long-term plan.
Here are 12 best investments for consideration, ordered by risk from lowest to highest. Keep in mind that lower risk usually also means lower returns.
Where to open a savings account:
Due to lower overhead costs, online banks offer higher rates than what you’ll get at traditional banks with physical branches.
High-yield savings accounts
Online savings accounts and cash management accounts provide higher rates of return than you’ll get in a traditional bank savings or checking account. Cash management accounts may pay interest rates similar to savings accounts, but are usually offered by brokerage firms and may come with debit cards or checks.
It is best for short-term savings or money you need to access only occasionally like an emergency or vacation fund. While transactions from a savings account are limited to six per month, cash management accounts offer more flexibility and similar or in some cases, higher interest rates.
If you’re new to saving and investing, a good rule of thumb is to keep between three and six months’ worth of living expenses in an account like this before allocating more towards other investment products on this list.
Certificates of deposit
A certificate of deposit, or CD, is a federally insured savings account that offers a fixed interest rate for a defined period of time.
A CD is for money you know you’ll need at a fixed date of one, three and five years. If you’re trying to safely grow your money for a specific purpose within a predetermined time frame, CDs could be a good option.
To get your money out of a CD early, you’ll likely have to pay a fee. As with other types of investments, don’t buy a CD with money you might need soon.
Where to buy CDs:
CDs are sold based on term length, and the best rates are often found at online banks and credit unions.
Where to buy a money market mutual fund:
Money market mutual funds can be bought directly from a mutual fund provider or a bank, but the broadest selection will be available from an online discount brokerage (you’ll need to open a brokerage account).
Money market funds
Money market mutual funds are an investment product, which are bank deposit accounts similar to savings accounts. When you invest in a money market fund, your money buys a collection of high-quality, short-term government, bank or corporate debt.
Money you may need soon that you’re willing to expose to a little more market risk. Investors also use money market funds to hold a portion of their portfolio in a safer investment than stocks, or as a holding pen for money earmarked for future investment.
Money market funds are an investment, but don’t expect higher returns and higher risk. Money market fund growth is more similar to high-yield savings account yields.
A government bond is a loan from you to a government entity (like the federal or municipal government) that pays investors interest on the loan over a set period of time, usually one to 30 years.
Bonds are known as a fixed-income security. Government bonds are virtually a risk-free investment, as they’re backed by the full faith and credit of the U.S. government.
In exchange for that safety, you won’t see as high of a return with government bonds as other types of investments. If you were to have a portfolio of bonds as opposed to a mix of stocks and bonds, it would be substantially harder to hit your retirement or long-term goals.
Conservative investors who would prefer to see less volatility in their portfolio. Bonds offer a protection shield to a portfolio, usually going up when stocks go down, which enables nervous investors to stay the course with their investment plan, and not panic sell.
The fixed income and lower volatility from bonds make them popular with investors nearing or already in retirement, as these individuals may not have a long enough investment horizon to weather unexpected or severe market declines.
Where to buy government bonds:
You can buy individual bonds or bond funds, which hold a variety of bonds to provide diversification, from a broker or directly from the underwriting investment bank or the U.S. government.
Where to buy corporate bonds:
Similar to government bonds, you can buy corporate bond funds or individual bonds through an investment broker.
Corporate bonds are similar to government bonds, only you’re making a loan to a company, not a government. These loans are not backed by the government, making them a riskier option.
And if it’s a high-yield bond (a junk bond), these can actually be substantially riskier, taking on a risk/return profile that more resembles stocks than bonds.
Investors looking for a fixed-income security with potentially higher yields than government bonds, and willing to take on a bit more risk in return. In corporate bonds, the higher the likelihood the company will go out of business, the higher the yield.
Bonds issued by large, stable companies will often have a lower yield. It’s up to the investor to find the risk/return balance that works for them.
A mutual fund pools cash from investors to buy stocks, bonds or other assets. Mutual funds offer investors an inexpensive way to diversify by spreading their money across multiple investments to hedge against any single investment’s losses.
If you’re saving for retirement or another long-term goal, mutual funds are a convenient way to get exposure to the stock market’s superior investment returns without having to buy and manage a portfolio of individual stocks.
Some funds limit the scope of their investments to companies that fit certain criteria, such as technology companies in the biotech industry or corporations that pay high dividends. This allows you to focus on certain investing niches.
Where to buy mutual funds:
Mutual funds are available directly from the companies that manage them, as well as through discount brokerage firms.
Be aware that mutual funds usually require a minimum initial investment of anywhere from $500 to thousands of dollars, although some providers will waive the minimum if you agree to set up automatic monthly investments.
Where to buy index funds:
Index funds are available directly from fund providers or through a discount broker.
An index fund is a type of mutual fund that holds the stocks in a particular market index (e.g., the S&P 500 or the Dow Jones Industrial Average). The main aim is to provide investment returns equal to the underlying index’s performance, as opposed to an actively managed mutual fund that pays a professional to compile a fund’s holdings.
Index mutual funds are some of the best investments available for long-term savings goals. In addition, Index funds are more cost-effective due to lower fund management fees, and they are also less volatile than actively managed funds that try to beat the market.
Index funds can be well-suited for young investors with a long timeline, who can allocate more of their portfolio toward higher-returning stock funds than more conservative investments, such as bonds.
Young investors who can emotionally weather the financial market’s ups and downs could even do well to invest their entire portfolio in stock index funds in the early stages.
Exchange-traded funds (ETFs)
Exchange-traded funds, or ETFs, are like mutual funds in that they pool investor money to buy a collection of securities, providing a single diversified investment.
The difference is how they are sold:
Investors buy shares of ETFs the same way they would buy shares of an individual stock.
Like index funds and mutual funds, ETFs are a good investment if you have a long time horizon. ETFs are ideal for investors who don’t have enough money to meet the minimum investment requirements for a mutual fund because an ETF share price may be much lower than a mutual fund minimum.
Where to buy ETFs:
ETFs have ticker symbols like stocks and are available through brokerages. Robo-advisors also use ETFs to construct client portfolios.
Where to buy dividend stocks:
The easiest way to buy dividend stocks is through an online broker.
Dividends are regular cash payments companies pay to shareholders and are often associated with stable, profitable companies. Dividend stocks can provide the fixed income of bonds as well as the growth of individual stocks and stock funds.
While share prices of some dividend stocks may not rise as high or quickly as growth-stage companies, they can be attractive to investors because of the dividends and stability they provide.
Keep in mind:
Dividends in taxable brokerage accounts are taxable the year dividends are paid out. Whereas non dividend stocks are primarily taxed when the stock is sold.
Any investor, from beginner to retiree, though there are specific types of dividend stocks that may be better depending on where you are in your investing journey. Young investors, may prefer companies with a strong track record of consecutively increasing their dividends.
These companies may not have high yields currently, but if their dividend growth keeps up, they could in the future. Over a long enough time frame, this combined with a dividend reinvestment plan can lead to returns that mirror those of growth stocks that don’t pay dividends.
Much older investors looking for more stability or fixed income could consider stocks that pay consistent dividends. On a short timeline, reinvesting these dividends may not be the goal. Taking the dividends as cash could be a part of a fixed-income investing plan.
A stock represents a share of ownership in a company. Stocks offer the biggest potential return on your investment while exposing your money to the highest level of volatility.
Investors with a well-diversified portfolio who are willing to take on a little more risk. Due to the volatility of individual stocks, a good rule of thumb is for investors to limit their individual stock holdings to 10% or less of their overall portfolio.
Where to buy stocks:
An easy way to buy stocks is through an online broker. Once you set up and fund a brokerage account, you’ll choose your order type and become a bona fide shareholder.
Where to buy alternative investments:
While some online brokers will offer access to certain alternative investments, other alternatives are available only through private wealth management firms.
However, there are ETFs including for oil, gold and private equity ETFs that track the asset itself, as well as companies related to the asset such as gold mining and refining companies.
If you’re not investing in the stock, bond or cash equivalent instruments, there’s a good chance your investment is part of the alternative assets class. This includes gold and silver, private equity, hedge funds, cryptocurrencies like Bitcoin and Ethereum, and even coins, stamps, alcohol and art.
Investors mostly accredited investors who want to diversify away from traditional investments and hedge against stock and bond market downturns.
Real estate investing involves buying a property and selling it later for a profit, or owning property and collecting rent as a form of fixed income.
One common hands-off way to invest in real estate is through real estate investment trusts, or REITs. REITs are companies that own income-generating properties like malls, hotels, offices, etc. and offer regular dividend payments.
Real estate crowdfunding platforms, which often pool investors’ money to invest in real estate projects, have also risen in popularity in recent years.
Investors who already have a healthy investment portfolio and are looking for further diversification, or are willing to take more risk for higher returns.
Real estate investments are highly illiquid, so investors shouldn’t put into an investment any money they may need to access quickly.
How to invest in real estate:
Some REITs can be bought on the public stock market through an online stockbroker, while others are only available in private markets.
Similarly, some crowdfunding platforms are open to accredited investors only, while others don’t put restrictions on who can invest.