In the world of investment with so many options, it can be difficult to understand what the right option for your money would be. We all want to consistently build wealth. But with any investment, there is a degree of risk that must be tolerated, even in long term investments. Therefore, I am going to highlight some of the most popular long-term investment options for you so you can make an informed decision.
If you are looking for the promise of great returns on your investment than growth stocks should be something you should consider. Growth stocks are typically tech companies, but they are not always. They generally glow all their profits back into the business, so they rarely pay out a dividend, at least not until their growth slows.
Growth stocks might sound great at first glance, but they can come with a lot of risk attached to them. Your money is attached to how well that company is performing, so if there is a recession or the company goes under you will lose a lot of money. Company value can fluctuate wildly. So, make sure you are keeping up with their company’s surrounding market, constantly projecting were economy, in general, is going. If you do not and sell at the wrong time you could lose a lot of money. You will want to commit about three to five years to hold these stocks at least before you can get a real idea of where the company is headed.
If you have a lower risk tolerance, then bond funds are worth considering. A bond fund – either a mutual fund or ETF – contains several bonds usually from a range of issuers. Bond funds are typically categorized by the type of bond in the fund – a bond’s duration, it’s level of risk, the issuer (municipality, federal government or corporate) and some other factors.
When a company or government issues a bond, it agrees to pay the bond’s owner a set amount of annual interest. At the end of the bond’s term, the issuer repays the principal amount of the bond, and the bond is redeemed. Therefore, bond funds are considered a safer option because they pay a fixed interest rate. The only risk is if the company or government goes under. Typically, government bonds are safer, so they are the best bet for the safest investment.
Real estate has often been the pinnacle of long-term investment. While it takes a good bit of money to get started, the commissions are quite high, and the returns often come from holding an asset for a long time and rarely over just a few years. It is still the favourite long-term investment for many looking to develop wealth over time.
It is an attractive proposition for many because it gives you somewhere to live and the interest rates are usually low on the loans you will get. You get to be your own boss and while the risk can be high, the rewards can be a lot higher. If you choose the right property and manage it well, you will see massive returns and have yourself a lovely home in the meantime.
For those who are looking for a quicker turn around on their investments, they should consider small-cap stocks. Small-cap stocks focus on relatively small companies. The reason they can be a great investment is that you can see insane growth in your value. Company’s like Amazon started out as a small-cap stock so whoever bought Amazon small-cap stocks must be very happy with their investment.
But that is not true for most though, you are taking a big gamble. Like growth stocks, investors often pay a lot of the earnings of a small-cap stock, especially if it has the potential to grow or become a leading company someday. And this high price tag on a company means that small-cap stocks may fall quickly in an economic downturn.
To conclude, there are a variety of options out there for the long-term investor looking to grow their wealth. Most of us need to ask the question, how much risk are we willing to take with our money? And how much time are you willing to spend focusing on market trends? Knowing the answers to those questions will help you decide which investment approach is right for your money.