Investing for the long term is the key to financial security, but the best investments change over time, depending on how the market and economy perform.
I’ve narrowed down the ten best investments right now to help you get your assets on track to reach your goals.
Best Investments Right Now
- High-Yield Savings Accounts
- Short-Term Certificates of Deposit
- S&P 500 Index Funds
- REIT Index Funds
- Series I Bonds
- Dividend Stock Funds
- Value Stock Funds
- Nasdaq 100 Index Funds
- Short-Term Corporate Bond Funds
- Physical House Rentals
1. High-Yield Savings Accounts
High-yield savings accounts may not feel like an investment, but they offer compound earnings and little to no risk, so they are a great option for a conservative and liquid investment.
HYSAs pay high-interest rates because most banks that offer them have little to no overhead because they operate online and do not have a brick-and-mortar location.
The nice thing about HYSAs is you aren’t investing. You automatically know the interest rate you’ll earn; if you leave the interest, it will compound further. HYSAs are good for investors who need a liquid investment they can access when needed.
They are also a diversification tool to offset the risk of more aggressive investments, as there is no tie to the stock market.
- Pays much higher interest rates than local banks, and they typically don’t have monthly fees or minimum balance requirements.
- Interest often compounds daily, allowing your savings to grow faster
- You can access your manage your accounts 24/7
- Interest rates can fluctuate; there’s no way to predict how they’ll perform
- Inflation can outpace interest rates, making it hard to reach long-term goals
- Your withdrawals are limited to six per month
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2. Short-Term Certificates of Deposit
Short-term certificates of deposit are often a better way to invest money than a savings account. Still, because C.D.s require an investment for a specific term, short-term C.D.s are best, especially when interest rates are higher.
C.D.s are an excellent short-term investment for anyone looking to add a conservative investment to their portfolio or increase the capital they don’t need immediately. Short-term CDs are often better than long-term because they offer flexibility to reinvest the funds in something with a higher rate during times of inflation.
Understanding the term and only investing in CDs you can leave untouched is important. If you withdraw funds early, you will pay a penalty, usually equal to three months of interest.
- Often pays a higher interest rate than savings accounts
- It offers a low-risk investment, especially if you invest funds in an FDIC-insured bank
- Have a fixed term so you know when you’ll get your principal back
- Your money is locked up for the entire term (or there is a fee)
- The interest earned is taxable
- CD rates don’t often keep up with inflation, so the shorter the term, the better
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3. S&P 500 Index Funds
The S&P 500 index is the most watched index in the world, and S&P 500 index funds mimic the index with ETFs.
Index funds are created by a fund manager whose goal isn’t to beat the market but rather mimic it. The only time the holdings in the index change are when the companies in the index change.
S&P 500 index funds include the 500 leading companies based on market capitalization in the U.S.
- Minimal investment is required since you invest in the entire index, not individual stocks.
- You get an automatically diversified portfolio
- The S&P 500 index has an average 10% return annually
- They are passively managed and have low expense ratios
- Companies are in the S&P 500 based on their market weight; if one industry is heavily weighted, such as technology, that industry could affect the index as a whole
- You can’t exclude specific stocks since the investment mimics the entire market
- You can’t beat the market
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4. REIT Index Funds
REIT index funds allow investors to invest in real estate without owning it directly. REITs are funds invested in real estate companies that, when publicly traded, include stocks spanning different sectors, such as apartment complexes, office buildings, and shopping malls.
They pay dividends on 90% or more of their profits because they aren’t taxed at the corporate level. REITs often appreciate over time, allowing for capital appreciation and further gains. Like any investment, they have volatility and should be considered a long-term investment.
- Offers two ways to reap earnings, including capital appreciation and dividends
- Low barrier to entry allowing even beginning investors a chance to invest in real estate
- Offers diversification away from the traditional stock market
- REIT dividends are taxed as ordinary income for investors
- Non-publicly traded REITs can have high fees and low liquidity
- Could be subject to market trends
5. Series I Bonds
Series I bonds are US Treasury-issued bonds that provide inflation protection. The bonds have a base interest rate posted and then add to it based on the current inflation rates.
In short, the bond’s rates rise and fall with inflation, so if inflation goes up, the interest rates increase, and if inflation falls, interest rates fall.
Series I bonds are another great way to diversify an aggressive portfolio because they have little to no risk of default. However, you can only set aside an annual limit of $10,000 per investor in Series I Bonds.
- I Bonds fluctuate with inflation and, even without inflation, often pay higher rates than other conservative investments like HYSAs
- Offers some tax benefits such as deferring interest payments until maturity or using the earned income for college (for qualified taxpayers)
- There’s little to no risk of default
- There’s an annual limit anyone is allowed to purchase ($10,000 per year plus up to $5,000 of your tax refund if applicable)
- The only place to purchase them is the U.S. Treasury website which isn’t user-friendly
- You must track the investment yourself since you don’t go through a broker to purchase them
6. Dividend Stock Funds
Dividend stock funds pay a portion of a company’s profits back to shareholders, usually quarterly. While there’s no guarantee a company will pay dividends, the chances are higher when you invest in long-standing companies. When you purchase dividend stock funds, you automatically get a diversified portfolio to reduce the risk of loss.
Dividend stock funds are good for investors looking for regular income who will reinvest the dividends to grow their capital further.
It’s important to find funds focusing on companies with a long history of paying dividends. It can be tempting to focus on the high-yield companies, but they are the ones that typically cannot withstand a financial crisis, whereas a long-standing company can.
- Offers a passive income stream that investors can reinvest to make the funds grow further
- Provides a steady income stream even if the stock market is declining
- Dividends of established companies rarely fluctuate
- A company isn’t required to pay dividends, so there’s no guarantee of the income
- It’s rare for even dividend stocks to cross the 10% rate of return threshold
- High-yield dividend companies are typically risky and don’t pay out
7. Value Stock Funds
Value stock funds are the opposite of dividend stock funds. These funds focus on bargain stocks or stocks that are undervalued but have high potential. Like any stock, there’s no guarantee of a return, but investors that hold onto value stock funds for three to five years often ride out the volatility and see returns.
Value stock funds allow investors more room to invest because the stock prices are lower, allowing them to purchase more funds, and have a higher chance of earnings. Like any stock, value stock funds fluctuate in price, so there’s always a risk.
- Value stock funds often have less volatility than growth stocks
- You may realize large profits if and when the stock and market correct themselves
- Pros like Warren Buffet follow this method
- Value stocks don’t perform at full capacity in bull markets
- Undervalued stocks can be subjective
- You may have to invest for the long term before you see returns
8. Nasdaq 100 Index Funds
If your focus is on tech companies, Nasdaq 100 index funds offer that focus with instant diversification. This way, the pressure is off you to choose the right companies, and you have a passively managed fund.
To invest in the Nasdaq 100 index funds, you must be able to withstand volatility and be interested in growth stocks, as some of the tech industry’s largest companies, like Apple and Microsoft, are a part of it.
Before investing in Nasdqa 100 index funds, be sure you’re committed to investing for at least 3 to 5 years.
- Provides instant diversification in some of the tech industry’s largest companies
- Many Nasdaq 100 index funds have low expense ratios
- You can purchase Nasdaq 100 index funds as ETFs or mutual funds
- There’s always risk in stocks, especially large company tech stocks
- You must commit to investing for the long-term
- The funds can be rather volatile
9. Short-Term Corporate Bond Funds
Short-term corporate bond funds aren’t as conservative as US Treasury-issued bonds but offer higher returns. Corporations issue bonds to raise money, typically having terms of up to five years.
Corporate bond funds work well for investors who want a conservative portfolio but that are not as conservative as government bonds. They work well to diversify a portfolio while providing short-term liquidity with terms of 1 to 5 years.
- May provide higher returns than government bonds
- You can purchase corporate bonds from brokers, getting help with choosing the right bonds and managing them.
- There are many options for bond terms.
- They are not guaranteed like government bonds, so there’s a higher risk
- Companies can quickly get into financial trouble and not be able to repay the debt
- Interest rates don’t change with inflation
10. Physical House Rentals
If you don’t mind acting as a landlord and can purchase additional properties, rental properties are a great way to diversify your portfolio. You don’t have the risk of stock market fluctuations and can earn monthly income from rent and other costs.
Physical house rentals can be a great option if you’re looking for a long-term investment that allows regular income and opportunities for capital appreciation.
If you want to start small, you can rent space in your current home, such as a finished basement or extra bedroom, using the money earned to save for a down payment on another property to build your portfolio.
- You can leverage your investment using mortgage financing
- Rental income provides regular monthly income
- You can earn capital appreciation on the property
- Owning property and working as a landlord is a lot of work
- There’s no guarantee you won’t have vacancies
- Real estate isn’t liquid
How To Pick The Best Investments for You
Choosing the best investments for your financial situation is important. The key is to determine the most important factors to help you reach your financial goals, including the following.
Your time horizon plays an important role in the investments you choose. Shorter-term goals need more conservative and liquid investments. In other words, you shouldn’t choose investments that tie up your funds long-term, not allowing you to withdraw them as needed.
Short-time horizons also mean you have a lower risk tolerance because you have less time to make up for a loss. In contrast, longer time horizons allow for more aggressive investments and potentially greater returns.
Risk tolerance is a personal choice, depending on what you can handle. Someone with a high-risk tolerance can withstand market volatility and ride out the waves. An investor with less risk tolerance may want more conservative investments. Of course, everyone should have a diversified portfolio with a mixture of aggressive and conservative investments.
Typically, the younger you are or the further you are from your financial goal, the higher your risk tolerance. But some people prefer more conservative investments to sleep better at night.
Your risk tolerance plays directly into your asset allocation. Conservative investors may focus on bonds, high-yield savings accounts, and CDs. In contrast, someone with a higher risk tolerance may have a portfolio of S&P 500 index funds, dividend stock funds, and real estate.
The key is diversifying your portfolio to get the best of all worlds while considering your time horizon and risk tolerance.
Diversification is necessary for every investor, no matter your risk tolerance. No one should put all their money into one type of investment or one sector. Diversifying means putting your funds in different markets so you don’t risk everything should one market fail.
Financial crises rarely affect all financial markets at once. For example, if you have money in dividend stock funds and real estate, they aren’t correlated, so if one market struggles, you have the other to offset your losses.
Experience With Investing
You don’t need to be an expert to invest, but you should have some knowledge so you know where to put your money. Beginning investors often start with high-yield savings accounts, CDs, and bonds but work up to diversified index funds.
Before investing directly in stocks, you should have a good handle on how the market works and what you can handle. Otherwise, index funds diversify various investments, providing a more hands-off approach.
If you have a large sum of money that you are looking to invest and really aren’t sure what is best, I recommend that you talk with a financial advisor to make sure you are putting your money to the best use.
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Hands-on or Hands-off
If you’re new to investing, a hands-off approach allows you to let your money grow even with little knowledge. You can watch how the investments do and gain experience/knowledge in the market to become a hands-on investor if you desire.
A hands-on investor has most of the stress on themselves, requiring you to make decisions about asset allocation, when to buy and sell, and how to manage expenses and taxes, whereas a hands-off approach, such as a robo-advisor that invests in index funds, does it for you.
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Amount You’re Investing
Some investments have minimum investment requirements, so the amount of capital you have to invest makes a difference. Be sure to understand the minimum investment requirements, timelines, and your need for liquidity.
Frequently Asked Questions
The best investments for you are the ones that meet your risk tolerance while helping you reach your financial goals.
What Is the Best Place To Invest Money Right Now?
The best place to invest money right now is the investment that meets your risk tolerance and financial goals. High-yield savings accounts, I-bond funds, and dividend stock funds are all great options.
How Much of Your Money Should Be in Stocks?
Ideally, you should have 10% to 20% of your income set aside for long-term investing, with a portion invested in stocks. How much you invest in stocks depends on your risk tolerance and financial goals. Longer-term goals allow for riskier investments, such as stocks.
Is It Ok To Invest During Uncertainty?
The key is to let your investments sit during times of uncertainty. Immediately bailing from an investment will likely lead to a loss, whereas riding it out and waiting for the market to correct itself can lead to greater returns.
Historically What Were the Best Investments?
The stock market provides the best historical returns, with an average return of 10% annually over ten years.
What Are the Best Investments for Beginners?
The best investments for beginners are CDs, high-yield savings accounts, I-bonds, and index funds. The key is to pay attention to the time the funds must be tied up, the historical performance, and the minimum investment requirements.
Which Investment Is Best for More Returns?
Dividend stock funds offer the best returns because they often pay dividends you can reinvest to compound your earnings.
What Is the Highest Paying Safe Investment?
Investment payouts vary daily but are good best for high-paying safe investments, including high-yield savings accounts (especially with today’s higher rates), I-bonds, and short-term CDs.
Is There a 100% Safe Investment?
No investment is 100% safe, but the investment is virtually risk-free if you invest funds in an HYSA or CD at an FDIC-insured bank and keep your investment lower than the $250,000 FDIC limit.
Choose the investments that meet your risk tolerance and timeline. Look at investments that you can handle riding out, even when things get rough, and that have the level of returns that will help you reach your financial goals.
Don’t forget to diversify your funds to offset the risk of a total loss and reinvest any cash earned to compound your earnings.