Investments should be as important to an adult as savings though few people do either of those things. Investments and savings should be focused on by everyone who looks to have strong finances. When consulting a financial advisor, they will generally help you with both short-term and long-term financial goals. Here are eight long-term financial investments you should consider.
Growth stocks are investments in companies with the promise of high growth. This high growth also offers high investment returns. These stocks don’t often pay dividends since most of these companies’ profits get invested back into the company. Dividends generally come once the growth begins to slow. If you are in for the long-term, this type of stock can pay off over time, as growth stocks have consistently been the best stock performers overall.
These stocks are considered higher risk because they can be vulnerable to market fluctuations but if you hold on to the stocks long-term, riding out those storms is all the investor needs to do to get a long-term payout on their investment.
Stock funds are mutual funds and are a great long-term investment for investors who don’t have time to study individual stocks. The fund’s return is based on the average return of all the companies in the fund. Stock funds are generally diversified, pulling in various companies, not all in the same industry. This diversification is an advantage over keeping it all in the same industry for those times certain industries will have a downturn as a whole.
Stock funds are lower-risk than growth stocks because they are a mutual fund with diversification. But they do still carry some market risks.
Bond funds are when the government or a company issues a bond. They then pay the bondholder a certain amount of interest each year. At the end of the bond term, the initial principal is paid back by the bond issuer. Bond funds are an excellent long-term investment due to their diversity and fairly low risk.
Bonds, while a good long-term investment, have a lower pay off so if you are looking for higher rates of return, they may not be where you want to place all of your investment dollars.
A dividend stock is a stock that has a regular cash payout. Dividend stocks are popular because they produce a regular income. They also are the best stocks to grow dividends over time. Like with all stocks, they are at higher risk because of the lack of diversification and the vulnerability of market fluctuations. But they are a great source of passive income when they are doing well as the dividends are paid out quarterly.
Real estate is a great investment due to the passive income over time as a rental property. Real estate is a great long-term financial investment because of the control as the property can be sold at any time.
Small-cap stocks are similar to growth stocks, the difference being that the companies are fairly small. If you stick with these stocks long-term, the pay off can be significant if the company you bought stock in grows substantially.
Robo-advisers are great if you don’t want to invest yourself. Robo-advisers leave the investing up to a professional; all you have to do is deposit money into the Robo account. A professional automatically invest it based on your goals. The Robo-adviser is another diversified portfolio, which makes it have a high return. It is also more stable because of diversification, but that contributes to its low rate of return.
An IRA CD is a good option if you’re risk-averse and want a guaranteed income without any chance of loss. Like the name says, this investment is just a CD inside an IRA. And inside a tax-friendly IRA, you’ll avoid taxes on the interest you accrue, as long as you stick to the plan’s rules.