The 10 Best Investments in 2020 — See Your Best Options

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10 Investments To Consider in 2020: Choose Your Best Option

Choosing the best investments is never an easy decision. Options need to be researched and evaluated, and potential rewards must be weighed against the possible risks.

The year 2020 is proving to be especially challenging for new and experienced investors alike. Put simply, there’s a lot to think about. It may be tempting to keep your money in the bank, but with savings rates at historic lows, that is not a very rewarding strategy.

Fortunately, there are many attractive investments for you to consider. To find the best investments to make money right now, you only need to do a little homework and give the matter a little thought.

What Is the Best Investment for 2020?

Here are the best investments that 2020 has to offer.

Cryptocurrency

Cryptocurrency is a relatively new investment vehicle based on blockchain technology. It is created by complex digital formulas and then traded on specialized exchanges.

Cryptocurrency can function as a private store of value, but it also has tremendous potential for appreciation. Demand often outpaces supply and causes prices to rise.

Keep in Mind

Because cryptocurrency hasn’t gained full acceptance, it is considered a risky investment. Investors who can’t afford to lose money should not invest.

Many brokers and exchanges exist to facilitate the buying and selling of this unique investment. It’s not hard to invest, but be careful. The crypto industry is not as regulated as other markets.

Key Takeaways:

  • New high-tech investment
  • High risk/high reward potential
  • Not fully integrated into markets

Gold

This valuable yellow metal has been an important part of investing throughout human history. Gold holds its value well during uncertain times, making it one of the best investments against inflation.

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The price of gold is determined by simple supply and demand dynamics. It has proven to be one of the best investments in 2020, as investors have been seeking stability in unstable times. It’s suitable for any investor with a sufficient time horizon.

There are many ways to invest in gold. You can invest in stocks of gold mining companies, buy physical gold or purchase mutual funds that focus on gold. GOBankingRates has created a handy guide called How To Invest in Gold to help investors navigate the process.

Key Takeaways:

  • Long investment history
  • A shelter against uncertainty
  • Many investment options

Certificates of Deposit

A certificate of deposit is a savings instrument that offers investors safety at a higher rate than other deposit accounts. CDs are issued for a specific amount of time from, one month to a number of years. In exchange for tying up the money for the term of the certificate, depositors are paid an enhanced interest rate for the life of the CD.

At the end of the CD’s term, the principal amount is returned, along with the interest earned.

CDs issued by banks are FDIC-insured and can be considered a conservative investment.

Virtually all regional and national banks offer CDs to new and existing customers, and they can also be purchased through brokerage and investment firms. Be aware, however, that there are usually significant penalties for “breaking” a CD by withdrawing money early. Choose CD terms wisely.

Key Takeaways:

  • FDIC-insured
  • Has a predetermined time horizon
  • Higher rates than other bank instruments

Corporate Bonds

Corporations borrow money by issuing corporate bonds. Investors buy the bonds, and companies promise to pay interest over the life of the bond and return the principal when the bond matures.

The rate at which a corporation pays investors depends on the company’s credit rating. Financially sound firms with good credit ratings pay lower interest. Weaker firms pay higher rates to attract investors.

Choose Highly Rated Bonds

The relative safety of any bond is based on the strength of the company. Bonds rated highly by credit agencies like Standard & Poor’s and Moody’s are safer relative to lower-rated bonds.

Corporate bonds can be purchased through a broker or investment firm.

Be aware of the term, or duration, of the bond, as you don’t want to buy long-term bonds for short-term goals.

Key Takeaways:

  • Lower-quality bonds pay higher rates
  • Value goes up and down with markets
  • Check ratings before investing

Exchanged-Traded Funds

Exchange-traded funds are pooled investments, similar to mutual funds, that trade on exchanges like stocks. Virtually all of the best investment companies of 2020 issue them and offer them to their clients.

Their performance depends on the performance of the underlying investments they represent. If the fund’s stocks or bonds go up, the ETF goes up.

There are dozens of ETFs available. Each one must be evaluated as a separate investment, not as an asset class. Some are fairly safe. Some are incredibly risky.

ETFs are available through virtually all brokerage firms and are among the best investments right now. It all depends on which one you choose.

When considering these investments, it’s critical to understand exactly what it invests in and who (if anyone) is managing it. As they say on Wall Street, use all due diligence before investing in an ETF.

Key Takeaways:

  • Similar to mutual funds but trade like stocks
  • Every ETF is different
  • Many to choose from; research required

Government Bond Funds

A government bond fund is a pooled investment that invests exclusively in U.S. government or government agency bonds. The funds come in the form of open-ended mutual funds or ETFs.

The objective of government bond funds is to provide current income to shareholders, but these funds can and do appreciate in value as well. When the trend of interest rates is going down, government bond funds tend to go up.

Government bond funds are appropriate for conservative investors looking for regular income payments.

Key Takeaways:

  • A relatively conservative investment
  • Value is not FDIC-insured
  • Pays income on a regular basis

Market Fluctuations

It’s important to remember that although government bonds themselves are backed by the U.S. government, the value of a bond fund goes up and down with the markets. These are not bank accounts.

High-Yield Savings Accounts

As the name implies, a high-yield saving account is an FDIC-insured bank account that pays a much higher rate than traditional savings or checking accounts.

With annual percentage rates down around .05% for savings accounts, getting a higher rate is more important than ever. Some of the highest yielding accounts are offered by both traditional banks and online banks that don’t have physical branches.

FDIC insurance eliminates the need to think about investment risk when using high-yield savings accounts. But when opening an account with an online bank, consider how you’ll be able to access your funds. Be sure the bank you choose can make transfers to your primary bank quickly and inexpensively.

Key Takeaways:

  • FDIC-insured bank accounts
  • Usually internet-based
  • Insist on easy transfers

Index Mutual Funds

The class of investments known as index mutual funds is designed to mirror the performance of a specific stock or other investment indexes, such as the Dow Jones Industrial Average or the S&P 500 Index.

The funds are invested in the very same securities that make up their corresponding index. When the index goes up, the fund goes up. Conversely, funds lose money when the indexes they track go down. The key is buying and selling at the right time.

Key Takeaways:

  • As many choices as there are indexes
  • Research and education are critical
  • Be prepared for market swings

Before You Invest

Index investing is as safe or risky as the index that’s being invested in. Know the asset classes and components of an index before you invest in an index fund. Many large stock indexes have enjoyed excellent performance so far this year, making index mutual funds some of the best investments of 2020.

Municipal Bonds

Municipal bonds are issued by state and local governments. They work and trade like other bonds, but there’s no federal income tax on the interest they pay.

Municipal bonds, sometimes called “muni bonds,” trade on major markets around the country. They can be purchased individually or in municipal bond mutual funds. The muni bond market is highly liquid, and these bonds can be turned into cash on any business day.

Municipal bonds go up and down, depending on rates and market factors. However, since they are ultimately guaranteed by state and local governments, they are considered a fairly safe investment.

Key takeaways:

  • Interest not subject to federal income tax
  • A robust market
  • Mutual funds or individual bonds available

High-Yield Bonds

High-yield bonds are sometimes called junk bonds, and they are often shunned by investors. But if you go in with your eyes open, high-yield bonds can be a worthwhile investment.

A high-yield bond is any bond not rated “investment grade” by the major rating agencies. The companies that issue them are not as financially sound as top-tier companies. That’s the downside. The upside is that they pay investors much higher rates to attract capital.

Investors can buy high-yield bonds individually in increments of $1,000, or they can buy specialized high-yield bond funds or ETFs. Relatively speaking, the bonds are not a volatile investment that will go down quickly in a rising interest rate environment. They pay well but are not suitable for conservative investors.

Key takeaways:

  • A high-yielding but somewhat risky investment
  • Research the asset class before investing
  • Invest through funds and ETFs

Things To Consider While Investing

Each of the investments presented above has its own risk profile and time horizon. CDs, for example, have no investment risk but come with strict time restrictions. Mutual funds are highly liquid but can go up or down every day.

To pick the best investments for you, it’s critical to match your risk tolerance with the potential volatility of the investment and choose investments that reflect your personal time horizons.

Set realistic goals before you make big investment decisions, and decide how much money you’re willing to allocate to the markets before moving money around.

Whether you’re a beginning investor or one who’s more experienced, it may be helpful to seek the advice of a competent, professional investment advisor. It’s always important to educate yourself before taking on investment risk.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Glenn is a writer and content creator providing high-quality web content to his clients in business and the media. His specialties are the financial markets, securities law and compliance and commercial real estate finance, but he writes on many other business-related subjects as-well.