The key to long-term prosperity is to save and invest. But what is a good investment? A good investment is anything that gives back more than you put in. If you’re buying stocks, for example, a good investment is a stock that you buy for $1,000 and sell for $2,000. But good investments don’t have to be financial. If you want a new skill, taking an online course also can be a good investment. If you want to buy a house, improving your credit or saving more money could be a good investment.
Start by defining what you would consider a good investment to help you achieve your goals. In whatever way you’re seeking to improve your lifestyle, some aspect of finance will probably be required. Here’s a look at five good investments you can make.
1. Invest in an Emergency Fund
Although you can never predict an emergency, it’s almost certain that at some point you’ll have to pay for something you don’t expect. That’s why setting aside money in an emergency fund is a good investment.
Most experts recommend you put away at least three to six months’ worth of expenses in case you need to cover a financial shortfall for an extended period of time, such as if you lose your job. Keeping your emergency fund in a high-yield savings or money market account is a good way to earn interest in the meantime.
2. Invest in a Diversified Portfolio
If you’re wondering how to invest money, most experts will tell you that you shouldn’t put all your eggs in one basket. Include different types of investment options, from stocks and bonds to ETFs and mutual funds.
When it comes to where to invest money, consider all asset classes, from government bonds and domestic stocks to overseas markets and precious metals. Diversifying your holdings can help reduce the risk associated with your individual investments.
3. Invest in Yourself
Self-improvement is always a good investment, whether you’re talking about learning academic subjects or “how to” instructions for more tangible pursuits. In this day and age, learning new job skills is also a necessity. The workforce continues to grow and get more competitive, and artificial intelligence is making some traditional jobs obsolete. If you’re continually learning more about your profession — and others — you can help make yourself indispensable in the modern job market.
Investing in yourself also can apply to your savings. One trick is to treat your savings account like a bill you budget for. The 50/30/20 budget rule, for example, recommends putting 20 percent of your income into savings and paying off debt.
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4. Invest in Your Retirement
If you work for a large corporation, investing money for your retirement is one of the easiest and tax-advantaged ways you can invest. If your company offers a 401k plan, you can set up automatic payroll deductions so you don’t even see the money before it gets invested.
Most companies also offer some type of 401k match, meaning the company will contribute money to your 401k account directly. That’s one of the available, as it amounts to free money. If you don’t have access to a 401k plan, you have numerous other options for investing, such as a traditional or Roth IRA plan.
5. Invest in Your Family
Beyond an emergency fund, you’ll need more coverage to adequately protect your family from disaster. Life insurance, disability insurance and long-term care insurance are all ways you can ensure your family is financially protected if a member of your family falls ill or passes away, particularly the primary breadwinner. Many of these policies are affordable, especially if you start young, and they can provide peace of mind for your entire family.
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