Investing is crucial to have a solid foundation for your future, but sometimes determining where to invest your money can seem daunting, with so many options available. Investing your money well, will provide you with a supplemental source of income when you enter your retirement years, and can also have a valuable cash asset if you have a financial problem in the future.
While there are many ways to invest your money, it is important to find the appropriate mix so that you can balance your risk between safe investments, and investments that have the possibility to give you larger gains. Some of the best ways to invest your money include:
- Treasury securities
- Money market accounts
- Corporate funds
- Growth stocks
- Dividend-paying stocks
- NASDAQ 100 Index Fund
CDs, or certificates of deposits, are investments offered by banks, which will provide you with a better interest rate then you would get just having your money in a bank account. These investments are insured by the federal government and can be bought at varying maturity dates, allowing you to choose how long you want them to hold onto the investment. The maturity period ranges anywhere from weeks to years. During this time period, any withdrawal of the money will result in a penalty.
With a CD, you will receive the interest payments regularly, and at its maturity date, you will receive back your principal along with any interest that has accrued. CDs can be good investments for those looking for safety in an investment, and higher payouts that a savings account can bring. You can also choose from a variety of maturity dates and interest levels to find the right one to invest in. These are one of the best low-risk investments. While there is no risk of losing your money, you do run the risk of earning less if the rates fall when you reinvest.
2. Treasury Securities
The United States government will often issue different securities to raise money in order to pay down debt and start new projects. T-bills will typically mature in one year or less. These can be the best investments right now that can protect you from losing any of your initial investment. They are different from CDs in that they are not interest-bearing and are instead sold at a discounted rate, and when they mature, you will receive the full value. For example, purchasing a $500 T-bill for $470 will give you a return of $30 on your investment.
You can also invest in treasury notes, which will come in terms of tow, three, five, seven, or 10 years. Every six month, you will be issued a fixed interest and will be able to collect the face value when the security fully matures. One main difference between a T-bill and a T-note is that the T-note can, at some point, be greater, less, or the amount of the value of the note as it will fluctuate with demand.
The final type of treasury security is T-bonds, which have a maturity rate of 30 years. You will be paid interest every six months and will get the face value when it matures. These securities fluctuate as well.
All securities can be bought in $100 increments, and will some may see some fluctuation, they are considered risk free because they are on the credit of the U.S. government. These assets are also considered to be highly liquid.
3. Money Market Accounts
Money market accounts are an FDIC-insureds, interest-bearing deposit account that works similar to a savings account, though it will earn higher interest, but also require a higher than normal minimum to open and keep the account. These are often great investment ideas for those looking for emergency savings as they tend to have a higher and are relatively liquid. The one drawback is that they can come with restrictions on the number and amount of withdrawals in a certain period of time.
The main threat against a money market account investment is inflation. This means if the rate of inflation exceeds the interest rate you are earning, then you could experience diminished purchasing power.
REITs, or real estate investment trusts, are companies that own and manage a number of real estate properties. These trusts do not pay taxes, as long as they continue to pass the lion’s share of the profits as dividends to their shareholders.
These are an ideal investment option for those who are looking to take advantage of real estate investments without having to go through the daily hassle of having to manage the properties. This type of investment is especially attractive for those looking for a more passive income.
When choosing which REIT to invest in, you can choose them based on subsectors, which will allow you to get into the industry you like. Some popular ones include:
- Data Centers
- Communication towers
REITS tend to be more steady investments and will often increase their dividends over time. But it is always wise to stick to REITs that are publicly traded as they can be more reliable that privately traded ones.
6. Short-Term Corporate Funds
Not only will the government have to raise money from time-to-time, but corporation s will need to as well. To raise this money, many corporations will issue short-term corporate bonds, which will have a maturity between one and five years. This can make them more stable as they will be less susceptible to interest rate fluctuations over time.
The main risk associated with this type of investment is they are not FDIC-insured, but they can still be a good investment for those looking for cash flow, such as retirees. The other drawback is that if a corporation gets into trouble, they could end up defaulting on their bonds, so make sure to do your research and choose wisely.
7. Growth Stocks
A particular segment of the market that has performed well over time are growth stocks. The stocks in this area are mainly comprised of tech companies that are growing their sales and expecting to gain profits quickly. These stocks do not typically pay out dividends as they tend to reinvest their money to grow the company exponentially.
These are one of the best investment options for those who are looking for a large return. With many of these stocks, you can expect to see returns of 20% for many years as long as you choose ones that are poised to grow. This type of investing is best left to moderate to advanced level traders because the volatility requires critical analysis before investing, to prevent a major loss.
The biggest risk with these stocks is volatility. When the market is down, these are the stocks that tend to fall the fastest. Since there is no protection against loss, you stand to lose your entire investment if the stocks you choose go south.
8. Stocks That Pay Dividends
If you are looking to play more in the market but are looking for more safe investment options that growth stocks, you might want to consider dividend-paying stocks. With these stocks, you can expect a payment, typically each quarter for your share of the company’s profit, based on the number of stocks you own.
Dividend-paying stocks can be great additions to your portfolio as they allow you to potentially earn on the long-term market investment, but also provide you with cash in the short term. While they are generally considered safer than non-dividend paying stocks, the risk will still fluctuate with the market, so it is important to always look for a solid history of increased dividend payments, to show that the company is relatively stable.
9. NASDAQ 100 Index Fund
If you are an investor who wants to get involved with some of the biggest tech companies traded, the NASDAQ 100 Fund may be the best investment option to consider. What’s great about investing in the fund, is that you will enjoy exposure to some of the largest tech companies, without having to perform the critical analysis when trying to choose winners and losers yourself.
The fund is just like the name sounds. It involves investments in the top 100 companies on the NASDAQ, meaning you will be investing in the most successful and stable ones. The pros of this type of investment are that you will have immediate portfolio diversification, as well as a cheap way to own pieces of some large companies.
The biggest risk with this investment is the movement of the market. While these stocks can be highly valued, it also means that they can downturn quickly, causing you to lose on the investment. But for long-term investing, it can be a relatively safe option and an ideal one for beginners.
Deciding which investments are best for you will largely have to do with your risk tolerance as well as how diverse your portfolio currently is. The key to successful future financial planning is mixing your levels or risk so that you can sometimes experience those higher rewards but have some protection against the volatility that can occur in the market. Want to learn more about how to invest your money? Download our free e-book, or sign up to attend our next webinar.