10 Best Long Term Investments To Consider for 2022
Many think of investments as something reserved for the wealthy or the more financially savvy, but that’s far from the truth. Most investment types are open to virtually anyone regardless of age, career or income. Long-term investments are one of the best ways to grow your money and even build generational wealth.
You can choose to put your money in a wide range of investment options depending on your risk tolerance and investing goals. While investing is risky, you can also lower your risk by diversifying your portfolio.
Picking the best long-term investments can be overwhelming, especially if you’re new to investing. Keep reading to find out the top investments to hold for the long haul.
Best Long-Term Investments for 2022
Here are the best long-term investments you may want to add to your portfolio.
1. Growth Stocks
Growth stocks are perhaps the most popular investment strategy. They promise high returns as the company grows. In most cases, growth stocks are tech companies, but this is not always the case. Their profits are usually injected into the business, so very few dividends are paid, if any.
Growth stocks are quite risky because most investors pay a lot of money for the stock compared to the company’s earnings. In that case, when there’s a recession, the stocks tend to lose value quickly. Nonetheless, growth stocks remain among the best long-term investments.
If you’re going to choose individual growth stocks, ensure you take the time to analyze the company carefully. Keep in mind that growth stocks have high volatility, so you’ll need a high-risk tolerance. Provided you find the right company to invest in, your reward is potentially limitless.
2. Certificates of Deposit
A certificate of deposit is an insured savings account that offers a fixed rate for a specific period. CDs are perfect if you know you’ll need a certain amount of cash at a selected future date.
CDs are a great way to safely grow your money for a predetermined period. The usual term lengths are six months, one year and five years, and your investments earn interest. Note that if you take money out of a CD before the agreed-upon period elapses, in some cases, you may have to pay a penalty fee, depending on the financial institution and their terms.
3. Bond Funds
Bond funds typically contain several bonds from various issuers. They are usually categorized based on the bond type in the fund, the duration of the bond, the riskiness and many other factors. One of the advantages of bond funds is there are various fund choices tailored to meet your needs.
Bonds are among the low-risk investments, especially those that are part of a fund. This is because funds own several bond types ranging across many issuers, so the holdings are diversified. So, if one bond defaults, there is little impact on your portfolio.
Bonds do fluctuate, but bond funds tend to remain relatively stable. The returns on bond funds are typically less than the returns on a stock fund, but bond funds are at lower risk than stock funds.
4. Exchange-Traded Funds
Exchange-traded funds are quite similar to mutual funds in that they offer a diversified portfolio. ETFs pool investor money and then buy several securities, providing a single diversified investment. The difference with ETFs is that they are traded when the market is open, like any other stock.
ETFs are an excellent investment avenue for investors with a long-term perspective. Additionally, they’re suitable for anyone who wants to invest in mutual funds but doesn’t meet the minimum financial requirements.
Bonds are essentially loans from investors to a government entity. When you loan the government money, they pay you interest over a specific period — typically one to 30 years. These bonds are very low-risk since the government’s credit backs them. The catch is that since it’s virtually risk-free, bonds won’t generate as high a return as you would get with other riskier investments.
Bonds are ideal for conservative investors who prefer a solid portfolio with minimum volatility. They are typically popular among retired investors whose investment horizons would not weather severe market declines.
6. Real Estate
Real estate is another best long-term investment to consider. While it needs a considerable amount of cash to start investing in real estate, you’ll eventually enjoy huge returns after holding the asset for a long time. Real estate is a popular investment option, mainly since you can borrow a loan from the bank to make the investment and then pay it back over time.
One drawback with real estate is that there is virtually no diversification. Having all your cash tied up to one asset is quite risky. However, you can also enjoy good rewards provided you have a good property and manage it well.
7. Dividend Stocks
Dividend stocks are simply stocks that pay out dividends. They differ from growth stocks because they do not gain returns as quickly. Instead, they pay out dividends to investors at regular intervals. In most cases, dividend stocks are found among mature companies with little cash need.
While dividend stocks are less volatile than growth stocks, they tend to rise and fall significantly. The major advantage of dividend stocks is that the companies raise their payouts year over year. So ideally, you get a pay raise every year.
8. Roth IRA
While this is technically a retirement account, it is one of the best investment options you can choose. Roth IRAs let you save with after-tax money, so your investment grows tax-free. You’ll also be able to withdraw it tax-free.
Roth IRAs give you special tax and legal advantages and are an excellent option if you want to grow your investments with zero chances of loss of the initial investment. Additionally, if you open your Roth IRA account at a brokerage firm, you get the freedom to invest in whatever fits your needs best.
9. High-Yield Savings Account
Opening a high-yield savings account is another best long-term investment to consider. A high-yield savings account offers higher interests than traditional savings accounts. If you’re looking for a place to secure your money over time and earn interest, this might be your perfect investment choice.
10. Alternative Investments
Alternative investments is an umbrella term that covers all investments that fall outside the traditional options, such as stocks and bonds. Alternative investments include commodities, gold, private equity and cryptocurrencies.
Since these are generally unregulated instruments, they have high levels of volatility. They are best for accredited investors who prefer to diversify away from the traditional investment options.
Long-term investments are a great way to build wealth over time and guarantee financial security. Before jumping into any investment, however, take time to analyze all your options so you can choose investments that best suit your needs. Getting advice from experts like financial advisors can help you make sound investing decisions.
John Csiszar contributed to the reporting for this article.
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