So you’ve saved up and have a little cash to invest. You like the idea of seeing that money grow. You’ll be able to afford that brand new Porsche, or that dream trip to Italy. But you didn’t learn finance too well yet, no fear that is where all things finance saves the day! Here are top 5 places to invest your money.
1) S&P 500 index
Aside from starting your own business and investing the returns into that business, there is no better risk adjusted way to earn a high return on your investment that investing in the S&P 500. The S&P 500 is a stock market index that invests in the 500 largest companies in the US economy based on market capitalization (market value). Investing here will likely generate you roughly 7% per year over the long term, the key point being that you hold this investment long term. This is because the overall markets will advance and decline in the short term, but have shown to rise substantially higher on each gain period. To invest here, look up tickers VOO or SPY with your online brokerage account.
2) REITS -Real Estate Investment Trusts
REITS are essentially ownership in real estate investments that allow for diversification, less risk relative to owning individual properties, and no annoying tenants calling you at midnight when you’re trying to enjoy your night. For a top quality REIT look up ticker NLY, or contact your broker about investing in a REIT index (which will invest in several REIT stocks)
3) Bonds -US Treasuries
Bonds in a nutshell provide passive income usually four times a year. Basically with treasury specific bonds you are investing your money with the US government (the US treasury) so they can invest in public education, infrastructure, and public health etc. Then they owe you this money as well interest or a cost for borrowing your money. Today, you will get about 3% per year for a 30 year bond. So if you invest 100,000 you will gain 3,000 per year. This is risk free and guaranteed because the government has never defaulted or not paid back their loans. That is why the return is lower than other investments, there is virtually no risk to you.
4) Real Estate
This is separate from investing in a REIT because it is a very different process. Owning an individual property entails a higher amount of risk but also higher potential reward. Here you would put up 50k for a loan for a 200k property and have your rental income out-way your mortgage costs. When the property value rises you can then sell the property for a profit. Here you can see much higher returns than investing in a REIT because you make the sale yourself and retain 100% of the profit. Real Estate can sometimes yield 50-100% in 2 or so years. The main risk to look out for hear is having to sell after a market decline, so as long as you are buying a property at the lower end of the real estate market then your property will likely rise in value in the future.
5) Yourself
Yes it’s a cliche but investing in yourself is the best investment you can make. Part of this will include the above 5 investments because part of investing in yourself is improving your finances. You should be investing in your financial, health, and social well-being as much as possible. Once your finances are in order, you will have enough money to eat healthy, work out daily, and travel to meet people that interest you! This may look like a fill-in point, but if you truly do invest in your skills each day you will see serious improvement over the long term.
If you’re really interested in learning more about investing your money then a great book to read is The Intelligent Investor
Best of luck!
