There’s no one answer to the question of where to invest. The best way for you depends on your goals, financial situation and tolerance for risk.
Investing your savings helps them grow at rates that often beat inflation. It’s especially important for people saving for retirement or who are close to retiring or buying a home.
Real estate
Real estate is a tangible asset that offers investors a steady stream of passive income and a potential profit at resale. It can also diversify a portfolio and offer tax benefits. Investors can buy single-family homes, multifamily properties, or even land. Alternatively, they can invest in real estate trusts (REITs) and real estate limited partnerships (RELPs), which trade like stocks on financial exchanges.
One of the best places to invest in real estate is Seattle, Washington. This city’s strong economy, growing population, and limited housing supply make it an attractive destination for investors. Other cities in the US that are great for investing include Charlotte, Raleigh, and Austin.
Another option for beginners is to invest in rental property. This type of investment is relatively easy and requires less upfront capital than traditional home buying. It is also easy to find a property manager to handle your property. However, it is important to do your research before investing in rental properties.
Stocks
Stowing away cash in a savings account is one way to build up emergency funds, but it won’t give your money the chance to grow. Investing in stocks is another way to make your money work for you over time.
A stock is a piece of ownership in a company that you can buy and sell on a public stock exchange. When companies go public, they open themselves up to more investment and can be subject to greater regulatory scrutiny.
When choosing stocks to invest in, it’s important to consider your risk tolerance and financial goals. Regularly reassessing your risk tolerance allows you to build a portfolio that aligns with your personal comfort level and helps you navigate market swings with confidence. Many online brokerages and robo-advisors have low account minimums, so it’s easier than ever to get started. Check out NerdWallet’s ratings to find a broker that fits your needs. Then, decide how much of your budget to allocate to stocks.
Bonds
Bonds are a good option for anyone looking to diversify their investment portfolio and provide steady income. They are essentially loans made to a government, corporation or other entity that are guaranteed to be repaid at a specific date in the future with interest payments along the way. Depending on your risk tolerance, bonds can offer diversification and stability but typically will not offer the same return potential as stocks.
You can buy individual bonds from your brokerage firm or through online exchanges. Many investors also choose to invest in mutual funds or ETFs that specialize in bonds. This makes it easier to create a diversified portfolio and reduces the hassle of managing individual bonds. However, it’s important to note that investing in bonds through these types of vehicles can expose you to currency risk if your bonds are denominated in foreign currencies. This can negatively impact your returns. This is one of the reasons why it’s often best to work with an advisor when purchasing individual bonds.
ETFs
The easiest way to invest is through exchange-traded funds (ETFs). These are a great option for new investors because they let you buy into popular indexes such as the S&P 500, giving you broad market exposure with little work.
ETFs are also available to target specific market areas like technology, green energy or large companies. These are called sector funds and allow you to gain exposure to individual sectors of the economy that interest you. They’re also useful for thematic investing, where you invest based on expected economic shifts and trends.
When choosing an ETF, pay attention to its expense ratio and its trading price. Also look for a unique identifier called a ticker symbol, which is how it’s traded on the stock market. Then determine how it fits into your overall investment portfolio and your asset allocation goals. Finally, evaluate your risk tolerance and the tax implications of owning this investment. Your Edward Jones financial advisor can help you make these important decisions.