So, what are the best investments for this year? The list below starts with some safer picks and then moves on to those that should deliver higher returns but may be more volatile, giving you a healthy mix of growth and safety during what looks like a tough-to-predict market environment.
Why invest?
Investing can provide you with another source of income, fund your retirement or even get you out of a financial jam. Above all, investing grows your wealth — helping you meet your financial goals and increasing your purchasing power over time. Or maybe you’ve recently sold your home or come into some money. It’s a wise decision to let that money work for you.
While investing can build wealth, you’ll also want to balance potential gains with the risk involved. And you’ll want to be in a financial position to do so, meaning you’ll need manageable debt levels, have an adequate emergency fund and be able to ride out the ups and downs of the market without needing to access your money.
Overview: Best investments in 2024
1. High-yield savings accounts
Overview: A high-yield online savings account pays you interest on your cash balance. And just like a savings account at your brick-and-mortar bank, high-yield online savings accounts are accessible vehicles for your cash.
Who are they good for?
A savings account is a good vehicle for those who need to access cash in the near future. A high-yield savings account also works well for risk-averse investors who want to avoid the risk that they won’t get their money back.
2. Long-term certificates of deposit
Overview: Certificates of deposit, or CDs, are issued by banks and generally offer a higher interest rate than savings accounts. And long-term CDs may be better options when you expect rates to fall, allowing you to keep your money earning higher rates for years.
Who are they good for?
Because of their safety and higher payouts, CDs can be a good choice for retirees who don’t need immediate income and are able to lock up their money for a little bit.
A CD works well for risk-averse investors, especially those who need money at a specific time and can tie up their cash in exchange for a bit more yield than they’d find on a savings account.
3. Long-term corporate bond funds
Overview: Corporations sometimes raise money by issuing bonds to investors, and these can be packaged into bond funds that own bonds issued by potentially hundreds of corporations.
Long-term bonds have an average maturity of 10 years or longer, making them a better choice when interest rates are falling, as they’re expected to do in 2024.
Who are they good for?
Corporate bond funds can be an excellent choice for investors looking for cash flow, such as retirees, or those who want to reduce their overall portfolio risk but still earn a return. Long-term corporate bond funds can be good for risk-averse investors who want more yield than government bond fund
4. Dividend stock funds
Overview: Dividends are portions of a company’s profit that are paid out to shareholders, usually on a quarterly basis. So, dividend stocks are those stocks that offer a cash payout — and not all stocks do — while a fund packages up only dividend stocks into one easy-to-buy unit.
Who are they good for?
Buying individual stocks, whether they pay dividends or not, is better suited for intermediate and advanced investors. But you can buy a group of them in a stock fund and reduce your risk. Dividend stock funds are a good selection for almost any kind of stock investor but can be better for those who are looking for income. Those who need income and can stay invested for longer periods may find these attractive.
5. Value stock funds
Overview: These funds invest in value stocks, those that are more bargain-priced than others in the market.
Who are they good for?
When stocks run up in valuation as they do from time to time, many investors wonder where they can put their investment dollars. Value stock funds may be a good option. Value stock funds are good for investors who are comfortable with the volatility associated with investing in stocks. Investors in stock funds need to have a longer-term investing horizon, too, at least three to five years to ride out any bumps in the market.
6. Small-cap stock funds
Overview: These funds invest in small-cap stocks, which are the stocks of relatively small companies. Small caps often have strong growth prospects, and many of the market’s largest companies were once small caps, so the potential gains can be significant. A small-cap fund packages dozens or even hundreds of small caps into a single, easy-to-buy unit.
Who are they good for?
Small-cap funds are appropriate for investors looking for attractive long-term returns and who are able to stay invested in them for at least three to five years, riding out volatility along the way. Because these funds are comprised of stocks, they’ll fluctuate much more than safer kinds of investments.
7. REIT index funds
Overview: A real estate investment trust, or REIT, is one of the most attractive ways to invest in real estate. REITs pay out dividends in exchange for not being taxed at the corporate level, and REIT index funds pass those dividends along to investors. Publicly traded REIT funds can include dozens of stocks and allow you to buy into many sub-sectors (lodging, apartments, office and many more) in a single fund. They’re a good way for investors to get diversified exposure to real estate without worrying about the headaches of managing the property. After some hard years for REITs amid rising rates, it may be time for them to shine in 2024.
Who are they good for?
REIT index funds pay out substantial dividends, making them an attractive place for income-focused investors, such as retirees. But REITs also tend to grow over time, so there’s some potential for capital appreciation, too. Prices of publicly traded REITs can fluctuate markedly, so investors need to take a long-term focus and be willing to deal with the volatility.
8. S&P 500 index funds
Overview: An S&P 500 index fund is based on about five hundred of the largest American companies, meaning it comprises many of the most successful companies in the world. For example, Amazon and Berkshire Hathaway are two of the most prominent member companies in the index.
Who are they good for?
If you want to achieve higher returns than more traditional banking products or bonds, a good alternative is an S&P 500 index fund, though it does come with more volatility. An S&P 500 index fund is an excellent choice for beginning investors because it provides broad, diversified exposure to the stock market. An S&P 500 index fund is a good choice for any stock investor looking for a diversified investment and who can stay invested for at least three to five years.
9. Nasdaq-100 index funds
Overview: An index fund based on the Nasdaq-100 is a great choice for investors who want to have exposure to some of the biggest and best tech companies without having to pick the winners and losers or having to analyze specific companies.
The fund is based on the Nasdaq’s 100 largest companies, meaning they’re among the most successful and stable. Such companies include Apple and Alphabet, each of which comprises a large portion of the total index. Microsoft is another prominent member company.
Who are they good for? A Nasdaq-100 index fund is a good selection for stock investors looking for growth and willing to deal with significant volatility. Investors should be able to commit to holding it for at least three to five years. Using dollar-cost averaging to buy into an index fund can help reduce your risk, compared to buying in with a lump sum.
10. Rental housing
Overview: Rental housing can be a great investment if you have the willingness to manage your own properties. To pursue this route, you’ll have to select the right property, finance it or buy it outright, maintain it and deal with tenants. You can do very well if you make smart purchases. With housing prices cooling off recently, a strategic purchase of real estate could work out well in the long term, especially as interest rates topped out in 2023.
Who are they good for? Rental housing is a good investment for long-term investors who want to manage their own properties and generate regular cash flow.
. Risks
