The best long term investments not only allow you to grow your wealth over time but also don’t require as much money and technical know-how upfront as, say, starting up a business. They’re perfect for people who want to build a more secure future but don’t necessarily have a lot of cash or investment experience to start. The options below offer a range of investment opportunities that work for most budgets. Below are some of the best long term investments you can consider.
Best Long Term Investments for a More Secure Future
Investing in stocks is one of the most common ways people invest to, hopefully, make their money grow. It essentially allows you to become part-owner of other people’s companies. If they do well, you make money. The only catch is that if they don’t, you lose money as well.
While the fear of loss can be a deterrent, it’s important to remember that any investment is a risk. However, not all investments (and therefore risks) are equal. There are ways of giving yourself the best chance to see returns on your investments. This means doing your homework and determining your personal risk tolerance. There’s no one out there who understands your threshold for risk so make sure you are doing research to make the most educated decisions possible for yourself. Two tips to help with this: First, invest only in companies with a proven track record. Second, don’t put all your money in one place.
2. Mutual Funds
A mutual fund pools money from many investors and then uses it to purchase assets. All the investing is done by professionals so it is perfect for people who are just starting out. It also distributes each investor’s money among different types of assets, minimizing your risk for losses. Even if one fails, the others can balance things out, keeping you from taking great losses. This diversity is one way to ensure you don’t have all your eggs in one basket. So by extension, if you lose from one, you may gain from another, evening out your investments.
3. Index Funds
An index fund is a type of mutual fund designed to simply copy the performance of a particular market index, eliminating the need for a lot of fund manager intervention. This, in turn, ultimately minimizes not only the risk of human error but also the amount of commissions the investors have to pay.
Investing in index funds allows you to buy shares not only of one company but a collection of different ones. For example, the S&P 500 Index, which has stocks in the 500 largest corporations in the country, is a great place to start your research.
Bonds are debt instruments issued for the purpose of raising capital. When you invest in them, you are effectively loaning your money to a company or the government for a predetermined period of time. Depending on the terms, a bond could take anywhere from a couple of months to 30 years to mature.
While they generally produce more modest returns than, say, stocks, they’re also significantly less volatile, making them perfect for people with low-risk tolerance. Bonds are set up so that they have regularly scheduled interest payments (often quarterly) until they mature. Finally, upon maturity, they also give each investor back the total money they put in.
5. Real Estate
Real estate is also one of the best long term investments you can consider. One of the things that makes real estate an appealing investment is that, with proper planing, real estate can be a fairly passive investment. While you may have to take out a loan to purchase the residence itself, once you get a tenant in, they’ll be the ones taking care of paying off the balance.
Investing in gold is another good option to consider. The best thing about precious metals like gold is that they are tangible, unlike stocks and bonds, which have no actual physical object to attach their value to. Because gold isn’t as drastically affected by inflation, many people see gold as an investment they can pass along for generations. Additionally, gold tends to be less volatile than the stock market making it a more stable, and lower-risk, investment. To learn about gold investing inside your IRA, our friends at Birch Gold Group can help explain your investment opportunities.
7. Certificates of Deposit
Finally, certificates of deposit (CDs) are another great long-term investment option to consider. Essentially, they are savings certificates that maintain a fixed maturity date, have a specific fixed interest rate and (apart for minimum investment requirements) can be issued in any denomination. They are fairly secure because the Federal Deposit Insurance Corporation insures CDs worth as much as $250,000.
If you’re looking to build wealth but don’t have the cash and experience to start your own business or capitalize on high-risk, high-return opportunities, then long term investments are a great alternative. They not only require significantly less money upfront but also allow complete beginners to start investing.
Which items on this list do you consider the best long term investments? Tell us in the comments section below.