There are several ways that you can secure your financial future. One of the best is to invest and not just investing but investing in the long-term. While many people may see investing as a short-term score in the stock, market regular investors build wealth with long-term investing. When you think and invest a long time you can meet your financial goals and increase financial security.
Today investors have many different ways that they invest their money and they can choose the risk they are whiling to take to meet their goals. You can choose safe options like the certificate of deposit (CD) or dial-up your risk with the potential for huge returns through Investments like stocks, stock mutual funds or ETFs. Below are the options that you can use when you are aiming for long-term investing.
1. Growth stocks
Growth stocks are like the Ferrari’s of stock investing. They promise high-growth as well as high returns on investment. Tech companies often offer growth stocks, but they are not the only ones. These companies basically put all their profits back into the business, so they are rarely paying out dividends at least not until their growth slows.
Growth stocks can be risky because oftentimes investors will pay a lot for the stock relative to the company’s earnings. In a bear market or recession, these stocks can lose value quickly. However, growth stocks have been shown to be some of the best performers over time.
If you want to buy individual growth stocks, make sure you analyze the company carefully although that may take a lot of time. And because of volatility in growth stocks, you should have a high-risk tolerance or decide to hold on to the stocks for a minimum of three to five years.
Growth stocks make up the riskier segments of the market because investors want to pay a top dollar for growth stocks, so when tough times arrive, these stocks plummet. Having said that, the world’s biggest companies like Facebook’s, Alphabet’s and Amazon’s are high growth companies which translates to potentially limitless rewards if you find the right company.
2. Stock funds
If you don’t have the time and effort for analyzing individual stocks, then a stock fund which is either an ETF or mutual fund can be a great option. If you buy a broadly diversified fund, you get many high-growth stocks, however, you will have a set of mixed companies than if you just own some individual stocks.
Some investors prefer highly risked and aggressive portfolio but don’t have the time to go full-on into investing, thus a stock fund is an excellent choice. When you buy a stock fund, you will get the weighted average return of all the companies in the fund which makes the fund less volatile than if you had just a few stocks.
A stock fund is easier to own and follows compared to individual stocks, but since you own stocks from different companies and not all of them will excel in any given year, you should have more stable returns. There are tons of potential upsides for a stock fund.
3. Bond funds
A bond fund contains numerous bonds from a variety of issuers. Bond forms are typically categorized by the bond in the fund, and this includes the bond’s duration, the riskiness, the issuer, and other factors. So if you’re looking at a bond fund, you’ll discover a variety of fund choices that meet your needs
When the bond is issued by a company or government, it agrees to pay the bond’s owner a set of amount of Interest annually.
A bond can be one of your safest investments and when they are part of a fund, they are even safer. Because a fund might own several bond types across several issuers, it can diversify its holdings and reduce the impact on the portfolio of any one bond defaulting.
Bonds are known to fluctuate but a bond fund will remain relatively stable, although it may respond prevailing interest rate changes. Bonds are generally safe compared to stocks but issuers are not the same, and one of the safest issuers is government issuers, while corporate issuers are riskier.
4. Real Estate
Real estate is the prototypical long-term investment in many ways. To get started takes a good chunk of money but the commissions are quite high and the returns usually come from holding an asset for a long time, which can be over several years. But real estate investment has been always one of America’s favorite investment options.
Real estate can be quite an attractive investment partly because you can take a bank loan for most of the investment and payback over a specified time period. This is popular as interest rates are often low. For those who want a proper long-term investment, owning property gives them that opportunity and numerous tax laws benefit owners of properties too. That said, while real estate is usually considered a passive investment, you still have to do quite a bit of active management if you are renting out your property.
One problem with this form of investment is that when you buy real estate all cash, you have so much money tied up in 1 asset. And you still have to keep paying a mortgage and other maintenance costs out of your pocket.
Just as the risks are high, so are the rewards. If you have a good property and properly manage it, you can get a higher return on investment if you can hold it over a period of time. Also, by paying off the mortgage on the property, you can enjoy greater stability and cash flow which makes investors see property rental as an interesting investment option.
On a final note, investing in the long-term is one of the best ways you can follow to build wealth and create financial security over time. However, the first step is to start thinking long-term and avoid obsessively following short-term markets. Hopefully, you can navigate your way with these long-term plan options listed in this article.