Investors typically want a significant return on their money when investing, such as 10% or higher. Unfortunately, no single type of investment can guarantee such gains in the short term; however, several types of investments have yielded positive long-term returns.
To find the appropriate investment, it’s important to keep both time and risk tolerance in mind when making a selection. In general, low-risk investments typically offer lower returns while high-risk ones could yield greater yields.
Equity Stocks Buy and Hold Strategy
One effective strategy to maximize investment returns is using a buy-and-hold strategy. By purchasing stocks or funds and holding onto them for years, compound interest will begin working its magic – as will dividend payments from companies, which further increase returns.
However, this strategy entails certain risks. For instance, it can be challenging to accurately forecast market movements which could compromise your investment returns and limit active trading flexibility that could help with managing periods of high market volatility.
Buy-and-hold investing strategies may also reduce the taxes you owe when selling investments, especially long-term ones that defer capital gains tax payments – this is particularly advantageous when investing in low-cost index funds that track an established market benchmark, as these funds tend to outshone active management strategies over the long haul, after fees.
Long-Term Investments
Longer term investments provide your investments with more time to grow, such as stocks, bonds, real estate or any other form of long-term holding period investments like stocks, bonds or real estate that offer tax-free growth potential. Individual financial goals and risk tolerance should determine which types of long-term holding period investments would work best; investors should also pay attention to costs associated with each instrument; the most ideal long-term investments have low management fees.
According to a Gallup poll conducted in 2011, savings accounts and certificates of deposit were the top choices for long-term investments in 2011. Unfortunately, these options do not pay enough interest over time to make a real impactful difference in your finances over time. Stocks have historically offered returns of approximately 9% after inflation; bonds and real estate yield lower returns; the key is finding combinations that suit your needs and objectives; financial advisors or online/robo advisors can assist in building your portfolios.
Short-Term Investments
If your investment goals are more short term in nature, a good place to begin would be with high-yield savings accounts, money market funds or treasury bonds. These types of investments tend to provide both stability and liquidity so your money will always be readily accessible when needed; you may also find they offer higher interest rates than traditional savings accounts.
These investments are considered low-risk because they are backed by the government and tend not to fluctuate significantly in value. However, you should keep in mind that their earnings won’t match that of long-term investments.
As you determine your investing strategy, there are various considerations to keep in mind when creating it. These include your goals, risk tolerance and timeframe to reach those goals. Consult with a financial professional in order to ensure your strategies align with these factors – Bankrate’s AdvisorMatch service can connect you with qualified advisors.
Tax-Free Investments
Tax-free investments may be an ideal way to preserve assets for retirement. Options that offer tax exemption include municipal bonds backed by state and local governments that are exempt from federal taxes; money market funds that specialize in municipal bonds that offer a tax-exempt yield; as well as ETFs with similar features as their taxable counterparts. Before investing any of your savings here, however, make sure they fit with your income level and financial goals by seeking advice from an accountant or financial planner.
Investment can be an excellent way to grow savings over time, but nothing beats paying off high-interest debt with cash-back or rewards cards – you could save thousands over time!
