A proven way to grow your wealth over time is to invest, but understanding where the best investment lies is going to take some time and some effort on your part to learn. Where is the best place to invest your money? Well, it really does depend.
For some people, investing in Bitcoin or ETH is a good place to begin, but for other people, they choose to invest in real estate because they want a tangible asset. There are investments that are accessible to virtually anyone regardless of income, age, career or investment goal. But these are factors that can influence which investments are best for you.
For example, if your money is coming from generational wealth, then you may already understand how to invest your money. But if you’ve come into an inheritance then you may not have a clue where to start. You need to think about the smart places you could put your money, so we’ve put together a big list of exactly where those are.
1. A high yield savings account
While this may technically not be an investment, the savings account rates can be quite high, which means you can receive a return on it. Online savings accounts offer a bigger return of investment than a traditional bank or savings account. There are some brokerage firms that pay high rates on uninvested cash as well, but if you’re considering savings accounts, these are best for short term savings or money that you need to access only occasionally. If you’re looking to build wealth in terms of an emergency or vacation fund, then a savings account is a good place to go.
2. Certificates of deposit
A federally insured savings account comes in the form of a certificate of deposit. This offers a fixed interest rate for a defined period of time, and now is a good time to go and take that fixed rate. Certificates of deposits won’t fluctuate if interest rates go down as they expected to. A certificate of deposit is good for money that you’ll know you’ll need at a fixed date. So if you’re planning on saving for a down payment for a house or you’re planning on saving for a wedding, a certificate of deposit is a good place to start. You may have to pay a fee if you decide to get your money back out of a certificate of deposit early, and it’s a good rule of thumb to not buy a certificate of deposit with money that you might need soon. Remember this is an investment and these are usually sold based on term length and the best rates available are generally found at online banks.
3. You could invest in government bonds.
Bonds offer investors a safe form of fixed income, and it’s a loan to a government entity, such as the federal or municipal government, that pays investors interest over a set period of time. Usually this can last from 1 to 30 years, but you do get to determine how long you want to pay for it. Because of the steady stream of payments, bonds are known as fixed income securities. The drawbacks, however, are that in exchange for the safety of a security, you won’t see as high of a return with government bonds as you may with other investments. If your whole portfolio was 100% bonds, it would be much harder to hit your retirement goals.
4. Corporate bonds
These operate exactly the same way that government bonds do, except that you’re making a loan to a company and not a government. These are not backed by the government, which make them a riskier option in case the business itself folds. And if it’s a high yield bond, these can be substantially riskier. You have to consider the risk return profile that resembles stocks or bonds to determine whether you want to go for it. If you’re looking for a fixed income security with higher yields compared to government bonds, and you are willing to take on a little bit more risk in return, corporate bonds that are issued by large, stable companies will have a lower yield. You can buy corporate bond funds or individual bonds through an investment broker if you’re looking to get started.
5. Invest in the money market
Money market mutual funds can be bought directly from a bank or a mutual fund provider. They’re an investment product, and they’re not to be confused with money market accounts. When you invest in a money market fund, your money buys a collection of high quality shortcut term government, bank or corporate debt. It’s really good for those who need their money soon and if you’re willing to expose yourself to a little more market risk.
6. Index funds
These are a type of mutual funds that hold the stock in a particular market, such as the Dow Jones. The aim is to provide investment returns over time that are equal to the underlying index’s performance. If you have long term savings goals or you’re looking to build a good retirement fund, these are a more cost effective way to do it. They are often with lower fund management fees and they’re less volatile than actively managed funds that often try to beat the market. If you are a young investor and you have a long timeline, you’ll be able to allocate more of your investment portfolio towards higher returning stock funds. If you can emotionally weather the market’s ups and downs and you understand how the market works, then index funds are a great place to invest.
7. Exchange-traded funds
Known as ETFs and they are like mutual funds in that they pool investor money to buy a collection of securities. This gives you a single diversified investment and the difference is how they are sold. An investor will buy shares of ETFs just like they would buy shares of any individual stock. So it’s great for those with a long term horizon line. ETFs are also ideal for investors who don’t have enough money to meet the minimum investment requirements for a mutual fund. These have ticker symbols like stocks and are available through brokerages.
8. Real Estate
If you’re looking for a smart place to put your money, then real estate is a good idea. If you have the wealth to be able to buy a fixer upper, update it, and then sell it on and do that on repeat, you should be able to receive a good return on your investment and build up either a portfolio of properties or a portfolio of savings. As with any type of investment, investing in real estate is a risk. Whether you’re a first time investor or you’re a retiree looking to maximise your savings, investing in properties can be stressful and often people choose to have property managers on board to help them to do it.
You’re ready to start investing in any of the options above. It’s time to get your research hat on. Going and speaking to a broker about what wealth you can access and what you can invest is important. Once you’ve done this, you can gain some understanding on exactly what you need to do to further your investment portfolio. It may take a little bit of time to get it right, but once you have your investments set up, you’ll be able to watch your wealth build and feel excited for the future that you have.