Preparing for the 2020s: 4 Smart Investment Ideas for 2019

Can you imagine how much money you could have made if you had invested just a few hundred dollars in Apple or Microsoft early on? Some may consider the best time to start investing was 20 years ago. The next best time is right now.

Putting your money to work for you is an excellent way to potentially grow funds towards financial security and retirement. However, it’s not as easy as just sticking your money into a high-interest account and withdrawing it when you need it. There are several types of investment vehicles available, all of which operate in different ways with the intention to make you money.

You need to know the differences between all of these types of investments to figure out which best fits your needs and your willingness to take risks. The following investment ideas can be a great way to start building towards your financial future.

4 Investment Ideas

Always remember that investments come with a fair degree of risk. You should only invest extra money that you don’t need for day-to-day expenses, and never invest more than you could stand to lose. It’s generally considered the best way to make money through investments is to ride it out: the stock market has returned an average of 10 percent each year.¹

In all likelihood, your investment strategy may combine several, if not all, of the ideas listed below.

1. Stocks

Stocks are a straightforward and well-known form of investment you can invest in. Stocks represent a share of ownership in a public company and will fluctuate in value depending on how that company does.

For more stable investments, you should look for established companies like banks, carmakers, and utility companies. These are known as “blue-chip” stocks and usually pay dividends per share, which is profit returned to the owners of the company. Dividends can be a great way to improve your return, help with potential losses, or to reinvest.

Most stocks for established companies pay dividends once a quarter, or four times a year.

While REITs are a great choice for investors who want to start seeing a return quickly, you should always remember to diversify your portfolio. If the real estate bubble bursts, you don’t want to only be holding onto REITs.

2. Mutual Funds and ETFs

Mutual funds and ETFs are essentially bundled investment packages. FINRA.org defines mutual funds as such: “technically known as an ‘open-end company,’ a mutual fund is an investment company that pools money from many investors and invests it based on specific investment goals.” ²

An ETF will typically have the professional management and built-in portfolio diversification that you could expect from a mutual fund, but, in contrast, ETF shares trade more like stocks and can be bought or sold throughout the trading day at fluctuating prices.³

Both mutual funds and ETFs usually have a combination of stocks, bonds, and other investments all at once, and by buying a share in a mutual fund or ETF, you invest in all of those things as well. This is a simpler way to diversify your portfolio without doing as much research yourself.

3. Bonds

Bonds are essentially loans that you give out to an entity, and as such are not tied to market movements as much. You can divide bonds into public and private bonds. Public bonds can either be municipal, which are issued by cities or states to raise funds for certain projects or they can be federal, which are issued by the Treasury Department.

Private or corporate bonds are issued by companies who are trying to raise capital. Public bonds are generally considered more reliable (it’s not likely that the US Government will go bankrupt), but they usually offer lower returns than corporate bonds do. The upside of bonds is that you know what the return is as soon as you buy it.

However, there is a market for selling bonds before their maturity date. This means that you may be able to sell bonds for immediate cash if need be, though it’s usually only a good idea when interest rates fall (which tends to make the higher interest rate on your bond more valuable).

Of course, this also means that if interest rates rise, the overall value of a bond will fall – so while bonds are considered less risky than stocks, they are far from risk-free.

4. REITs

Real Estate Investment Trusts, or REITs, are companies that hold real estate, and collect rent every month as a result. REITs are often an exception to the general dividend pattern- in the sense that many REITs pay dividends every month.

While REITs can be a great choice for investors who want to start seeing a return quickly, you should always remember to diversify your portfolio. If the real estate bubble bursts, you don’t want to only be holding onto REITs.

Talk Over Your Investment Plans with a Professional

No matter how much money you’re looking to invest, it’s always better to talk to a professional. While you can take the time to teach yourself and learn about individual stocks and opportunities, why not leverage the experience of others?

For any inquiries about evaluating investment ideas and drafting an investment strategy that is unique to your financial needs, contact us today!

 

 

 

 

¹ “What Is the Average Stock Market Return?”, James Royal, PH.D. & Arielle O’Shea, Nerd Wallet, September 3rd, 2019

² “Mutual Funds”, FINRA Staff, Financial Industry Regulatory Authority, December 2nd, 2013

³ “Exchange-Traded Funds”, FINRA Staff, Financial Industry Regulatory Authority, July 15th, 2013

The information provided in this article is based on our general understanding of the subject matter, is not investment or securities advice, and does not constitute an offer.
Mutual funds are offered by prospectus. For a prospectus with more complete information including investment objectives, risks, charges, and expenses, please contact your financial professional and read the prospectus carefully before investment or sending money.