Investing is the thing that people tend to feel least confident and competent in undertaking without professional guidance. And rightfully so, with real, hard-earned money on the line. Life savings and/or retirement funds are typically at stake. Though we here at Study Finds are by no means offering financial or investing advice in this article, we did scour the web to find for you the best investments recommended by experts.
With the abundance of investment options, it’s hard to know where to begin. Do you only need a savings account? A CD? Stocks? Bonds? ETFs? NFTs? REITs? Maybe you should consider rental properties? Farmland investing? The number of choices can feel overwhelming and appear endless.
In addition to sorting through investment options, you’ll also need to consider your risk tolerance. This will help you decide your asset allocation. If you are more conservative with your money you will most likely not opt for a stock-only portfolio. And if you’re not risk averse, you may need more excitement than bonds can provide. So many things to think about.
Let’s get to the investments the pros recommend. From seven experts’ lists, we compiled the consensus five best investments recommended most in today’s economy. Of course, we want to hear your two cents, so please comment below to tell us your investment of choice!
The List: Top 5 Investments, According to Experts
1. High-Yield Savings Account
A savings account may not come to mind when you think investing but making money with your money is the name of the game. With rising interest rates, a high-yield savings account is a safe way to do just that.
If you do not have a high risk tolerance, this may be a good place for you to start. As Bankrate notes, this type of account “works well for risk-averse investors.” Though they also mention that, while this is a safe form of investing, there is potential to lose purchasing power over time. If inflation stays ahead of your rate of return, your dollars will be worth less in the future.
Nerdwallet writes, “savings accounts are best for short-term savings or money you need to access only occasionally — think an emergency or vacation fund.” If you’re thinking longer term, some of the other investment options on this list may be a better fit.
2. Certificates of Deposit (CDs)
CDs are considered relatively safe investments; and you can get them at banks and credit unions. The major risk is the same as with that of a high-yield savings account, you may lose future purchasing power due to inflation.
You do have the option of short-term or long-term CDs. Most websites we visited recommended the short-term simply because of rising inflation.
But how does this type of investment work? Entrepreneur writes, “when opening a CD account, the financial institution you are banking with will pay you interest regularly. Once the account matures, you will get your original principal balance back, plus the amount of interest on that account.”
Do keep in mind, though, that “once you put your money in, you can’t access it – without penalty – until the maturity date, which ranges from six months to five years,” writes Forbes. If you will need your money in the near future this may not be the best option.
3. Bonds or Bond Funds
Now, there are different types of bonds, and some do carry more risk than others. You can invest in government bonds, corporate bonds, and even funds that contain a mix of bonds. Those categories are broad, so if you’re interested in bond investing, we recommend doing a deeper dive. But let’s touch on what bonds are.
“Bonds, which are loans to a company or government,” writes The Motley Fool are considered a safer investment than stocks. The entity that you are loaning money will pay you interest on that loan allowing you to earn money over time. For that reason, bonds are also called fixed-income securities.
And when it comes to bond funds, the good news right now as Bankrate writes is that “bond funds pay out on a monthly basis, and with rates surging higher in 2022, these funds pay quite a bit more than they have in the recent past.”
4. Index Funds
Index funds are “baskets” of stocks, bonds, or a mix of both. Some of these funds hold thousands of stocks and/or bonds, which offers more diversification than individual stock or bond picking. They are passively managed, tracking an index such as the S&P 500, Nasdaq-100, or others, and generally have low fees associated with them.
Next Advisor writes of choosing index funds: “This process works well if you don’t have time or interest in picking individual stocks. Plus, over time this strategy tends to generate higher returns.”
If you’re trying to beat the market, keep in mind that index funds are not designed to do that where they track an index. “Given that most major indexes are used to track the overall movement of the market, they perform about as well as the overall market does in the very long term,” writes Rule One Investing.
5. Dividend Stocks or Dividend Stock Funds
With dividend producing stocks, companies pay out some of their earnings in the form of dividends. These distributions are usually paid to shareholders quarterly, but they can be paid monthly or annually instead.
If you do not want to pick individual companies to invest in, there are funds that contain within them many dividend-paying stocks. Whether you choose individual companies or funds, they can serve as a form of additional income.
As with all types of investments, there are tax implications to think of. Nerdwallet writes, “keep in mind: dividends in taxable brokerage accounts are taxable the year dividends occur. Whereas stocks (that do not pay dividends) are primary taxed when the stock is sold.”
Lastly, don’t forget risk. Forbes writes, “but dividend stocks aren’t without their own risks. While they’re often considered safer than growth or non-dividend-paying stocks, not every company that pays a dividend is a worthwhile investment. (Some even pay unsustainable dividends to encourage investors to buy in.)”
- Real Estate and REITs
- Money Market
Note: This article was not paid for nor sponsored. StudyFinds is not connected to nor partnered with any of the brands mentioned and receives no compensation for its recommendations.