Are you looking to build long-term wealth and secure your financial future? Investing can be a powerful tool, but it can be hard to choose the right options1. Since 1976, Bankrate has helped people make smart financial choices1. This article will look at the top 10 best investments for growing your money in the US market. We’ll cover everything from safe choices like high-yield savings accounts to riskier options like stocks and real estate. By knowing your risk level and spreading out your investments, you can increase your earnings and reach your financial goals.
Key Takeaways
- Investing can provide another source of income, fund retirement, or help get you out of a financial jam.
- It’s important to balance potential gains with the risk involved and ensure you’re in a strong financial position before investing.
- Diversifying your portfolio and understanding your risk tolerance can help you maximize your returns and work towards long-term wealth building.
- Bankrate’s content is authored by highly qualified professionals and edited by subject matter experts for objectivity, accuracy, and trustworthiness.
- Bankrate does not offer advisory or brokerage services and does not provide personalized investment advice.
Why Invest?
Investing is a smart way to build wealth over time and meet your financial goals2. By letting your earnings grow, you can save for retirement, overcome financial hurdles, and buy more things2. But, remember, investing comes with risks. It’s important to know how much risk you can handle2.
Building Wealth for Financial Goals
Investing can help you grow your wealth and achieve your goals, like buying a house, saving for school, or retiring comfortably3. The sooner you start, the more time your money has to grow3. Even small monthly savings can become a lot over time, thanks to compounding4.
Balancing Risk and Return
Finding the right balance between risk and reward is key in investing2. Spreading your investments across different areas, like stocks, bonds, and real estate, can reduce risk3. Stocks might offer big returns but can also be more unpredictable2. It’s wise to keep risky investments to 10% of your assets, even if you’re experienced4.
Knowing your financial goals, how much risk you can take, and the investment options available helps you create a well-rounded portfolio3. Whether you’re starting or improving your investments, a careful and balanced strategy can help you reach your financial dreams4.
“Investing is a long-term strategy for building wealth, not a get-rich-quick scheme. Patience and discipline are key to achieving your financial goals.”
High-yield Savings Accounts
If you’re looking for a safe, low-risk investment, consider high-yield savings accounts. They offer higher interest rates than traditional bank accounts. This is because online banks have lower costs5. Plus, many of these accounts are FDIC-insured, which means your money is safe up to a certain amount5.
In July 2024, the best high-yield savings accounts were compared across 175 banks and credit unions5. The BrioDirect High Yield Savings Account and Ivy Bank High-Yield Savings Account both offered 5.30% APY5. TAB Bank High Yield Savings had a 5.27% APY56. UFB Secure Savings offered up to 5.25% APY56. Laurel Road High Yield Savings® had a 5.15% APY5, and Bask Interest Savings Account and EverBank Performance℠ Savings provided a 5.10% and 5.05% APY, respectively5.
High-yield savings accounts can earn around 5%, much higher than the national average of 0.45%7. Experts think there might be a rate cut in September 2024, which could lower savings rates7. But for most of 2024, rates might stay above inflation, helping you keep your purchasing power5.
When picking a high-yield savings account, look at interest rates, deposit needs, and fees to save money wisely5. The low-risk investments from these accounts can be a smart choice for your financial plan5.
Certificates of Deposit (CDs)
Certificates of Deposit (CDs) are a solid choice for investors who want a steady return and don’t like taking risks. They come with fixed interest rates for set periods, usually one, three, or five years. This makes the return on investment predictable8. The FDIC insures CDs up to $250,000, making them a safe bet8. CDs often pay more interest than savings accounts, especially for longer terms, which encourages investors with a long-term view to choose CDs over savings accounts8.
Fixed Interest Rates for Defined Periods
CDs stand out for their fixed interest rates that don’t change during the investment term9. They’re backed by the U.S. government, offering up to $250,000 insurance per depositor, per bank, per account type9. This makes CDs a great option for those wanting a stable investment with low risk.
Penalty for Early Withdrawals
CDs have fixed rates and stability, but you’ll face a penalty if you take out your money early8. Penalties can be steep, often taking a month’s interest or more8. So, it’s key to only put money in CDs you won’t need soon.
There are also special types of CDs available10. Add-on CDs let you add money later, perfect for growing your savings over time, but the rates might be lower10. Bump-up CDs let you take advantage of higher rates by changing your CD’s interest rate10. Jumbo CDs need a $100,000 investment but offer higher rates10. No-penalty CDs don’t charge early withdrawal fees but might have fewer options and lower rates than regular CDs10.
It’s wise to spread out your investments to reduce risk when considering CDs8. CDs are safe thanks to FDIC insurance up to $250,000 per depositor, per account, making them a secure choice9.
“No one has ever lost a single cent invested in CDs backed by the FDIC.”9
In summary, CDs are a dependable way for investors who prefer stability to grow their short-term savings. With fixed rates, FDIC insurance, and various options, CDs offer a secure and predictable investment for those seeking steady income and low risk.
Government Bonds
Government bonds are a type of investment where you lend money to the government. They are seen as safe because they are backed by the U.S. government’s promise11.
Low-Risk Fixed-Income Securities
These bonds are great for investors who want steady, predictable returns. They don’t offer big gains but are stable, making them a good choice for a balanced portfolio11.
You can buy government bonds on your own or through bond funds. These funds let you invest in many bonds at once, making it easier for investors11. Government bond ETFs are also an option, with fees under 0.20% per year, making them affordable for many11.
Suitable for Conservative Investors
Government bonds are perfect for those who want to keep their money safe and earn steady income1112. Treasury bonds are especially useful for this, as they’re seen as a standard for interest rates and are great for retirement plans12.
They might not grow as much as riskier investments, but they’re key for a balanced portfolio. They help reduce overall risk and provide a solid base for growing your money over time1112.
| Type of Government Bond | Maturity Dates | Yield Characteristics |
|---|---|---|
| Treasury Bonds | 20 or 30 years | Fixed rate of interest every six months until maturity13 |
| Treasury Notes | 2, 3, 5, 7, and 10 years | Fixed rate of interest every six months until maturity12 |
| Municipal Bonds | Varies based on issuer | Varying yields based on maturity and credit quality11 |
Government bonds at both federal and local levels offer many options for different risk levels and goals1112. They provide a steady income stream, making them a key part of a diversified portfolio. They’re especially good for those who want to keep their investments safe and reduce risk111213.
Corporate Bonds
Corporate bonds let investors lend money to companies. They get back the principal and interest over time14. These bonds can be traded or kept private. Companies use the money for things like buying assets or funding research14.
Corporate bonds are riskier than government bonds because they’re not backed by a government14. But, this risk means they might offer higher returns14.
Some corporate bonds are much riskier than others, like “junk” bonds14. It’s important to know the company’s creditworthiness and your own risk level before investing14.
The Columbia Corporate Income CRIYX fund has done well, ranking highly in its category15. The Vanguard Intermediate-Term Corporate Bond ETF VCIT was up 1.64% in 202315. Its yield was 6.24%, higher than the iShares US Treasury Bond ETF15.
Corporate bonds can offer higher yields and liquidity16. They can also grow in value if the company does well16. But, it’s key to look at the risks, like the company’s credit and market conditions14.
Investors might look at bond ETFs for diversification and ease16. ETFs offer more benefits than individual bonds16.
“Corporate bonds can be a valuable addition to a diversified investment portfolio, providing the potential for higher yields and capital appreciation, while also introducing additional risk that must be carefully managed.”
Money Market Funds
Money market mutual funds are a great choice for those who want a low-risk investment. They pool money to buy short-term debt from governments, banks, or companies. This makes them stable and liquid, offering modest returns17.
Low-Risk Investment Option
Money market funds are known for being low-risk. NerdWallet says they’re a safe choice for part of your portfolio17. They have a stable value of $1 per share and hold high-quality, short-term assets. This reduces the risk and keeps your investment safe17.
Lower Returns than Other Investments
Money market funds give better returns than a savings account but not as much as stocks17. They grow like high-yield savings accounts, making them good for short-term savings or adding variety to your investments17.
| Money Market Fund | Yield | Expense Ratio | Fund Assets | Minimum Investment |
|---|---|---|---|---|
| Vanguard Federal Money Market Fund | 5.28% | 0.11% | $301.4 billion | $3,000 |
| Schwab Value Advantage Money Fund | 5.13% | 0.34% | $194.8 billion | None |
| JPMorgan Prime Money Market Fund | 5.03% | 0.50% | $82.8 billion | $1,000 |
| Invesco Government Money Market Fund | 5.04% | 0.32% | $5.5 billion | $1,000 |
| Fidelity Money Market Fund | 5.03% | 0.42% | $110.2 billion | None |
| Vanguard Municipal Money Market Fund | 4.0% | 0.15% | $18.2 billion | $3,000 |
The table shows details of top money market funds, including their yields, fees, size, and the amount you need to start investing18.
Even though money market funds are seen as low-risk, they’re not risk-free. All investments, including these funds, carry some risk17.
“Money market funds can be a valuable tool for investors looking to preserve capital and maintain liquidity, but they should not be viewed as a substitute for higher-risk, higher-return investments that are necessary for long-term wealth building.”
In summary, money market funds are a low-risk choice that can offer stable returns and add variety to your investments. They might not grow as much as other investments, but they’re important for a well-planned financial strategy171819.
Mutual Funds
Mutual funds pool money from many investors to invest in stocks, bonds, or other assets20. They offer a way to invest in the stock market without the hassle of picking stocks yourself20. This makes them a good choice for those looking for long-term growth.
These funds come in different types, focusing on specific areas like technology or dividend stocks20. They are great for retirement planning because they spread out investments to reduce risk20.
According to NerdWallet, some top U.S. equity mutual funds include Victory NASDAQ-100 Index and Vanguard Growth Index Investor20. These funds have been doing well over the past five years. NerdWallet also rates investment firms highly, with scores of 4.9/5 and 4.3/520.
When picking a mutual fund, look at the fees, minimum investments, and any special deals20. The SEC has made rules to ensure funds match their names, making things clearer for investors21.
Mutual funds offer various options, from high-risk stock funds to safe money market funds20. It’s key to read the details to know what you’re getting into21.
Even with mutual funds, you could still lose money21. It’s best to think long-term and diversify to manage risks22.
| Mutual Fund Category | Potential Returns | Potential Risks |
|---|---|---|
| Stock mutual funds | Higher | Higher |
| Bond mutual funds | Lower | Lower |
| Money market mutual funds | Lowest | Lowest |
Understanding the different mutual fund types is important. Know about fees like management and 12b-1 fees, which affect your returns20.
Taxes can impact mutual funds too. Short-term gains from stocks are taxed at 15%, while long-term gains are taxed at 10%22. Debt funds have different tax rules, with short-term gains taxed based on your income level22.
Mutual funds are a great way to grow your wealth over time22. By understanding their fees, taxes, and the need for a long-term view, you can make smart choices for your investments22.
Index Funds
Index funds are a favorite among investors who want a simple, low-cost way to grow their wealth over time. They track a specific market index, like the S&P 500, without the need for active management. As NerdWallet explains, their passive approach and low fees make them a great choice for investors.
Index funds shine because they offer broad market exposure and diversification at a low cost23. For instance, the Fidelity ZERO Large Cap Index fund has no annual fee for every $10,000 invested23. It also boasts a 5-year return of 15.3 percent23. The Vanguard S&P 500 ETF, another top pick, has a tiny 0.03 percent fee and a 5-year return of 15.2 percent23.
Index funds are known for their simplicity and steady performance, making them ideal for long-term wealth building. Morningstar research shows they often beat actively managed funds in various categories24. The first index fund, the Vanguard 500, started in 1976, marking the beginning of their popularity24.
Diverse Options for Index Fund Investing
Investors have many index fund options to choose from, depending on their goals and risk tolerance. Bankrate lists some top-rated index mutual funds and ETFs for 2024, including:
- U.S. stock index funds: Vanguard S&P 500 ETF, Fidelity Mid Cap Index, and iShares S&P 500 Index24
- International stock index funds: Vanguard FTSE All-World ex-US ETF, Fidelity Total International Index, and iShares Core MSCI Total International Stock ETF24
- Bond index funds: Fidelity US Bond Index, Vanguard Short-Term Treasury ETF, and iShares Core US Aggregate Bond ETF24
- Specialized index funds: Vanguard FTSE Europe ETF, Vanguard Short-Term Inflation-Protected Securities ETF, and Schwab US TIPS ETF24
With over 20,000 U.S.-listed stocks to choose from25, index funds provide a convenient way to invest in the broader market. They help reduce the risk of picking individual stocks. Whether you’re starting or looking to simplify your portfolio, index funds could be a key part of your investment plan.
“Index funds are a simple, low-cost way for investors to gain broad exposure to the stock market and potentially achieve long-term growth.” – Financial Expert, XYZ Investments
Exchange-Traded Funds (ETFs)
ETFs are a popular choice for investors who want to diversify their portfolios without a lot of hassle. They let you invest in a mix of stocks, bonds, or commodities with just one fund share26. This makes it easy to manage risk and keep your investments stable27.
Diversified Portfolios in a Single Fund
ETFs are great because they offer a mix of securities in one fund. Each ETF tracks a specific market or sector. This mix helps protect your investments from big losses, leading to more stable returns over time27.
Covering Various Asset Classes
ETFs now cover a wide range of assets, from stocks and bonds to commodities and specific sectors27. This variety lets you create a portfolio that matches your risk level and goals. It’s a smart way to build wealth over the long term26.
| ETF Type | Example | Asset Class |
|---|---|---|
| Stock ETF | SPDR S&P 500 (SPY) | U.S. Equities |
| Bond ETF | iShares Core U.S. Aggregate Bond ETF (AGG) | U.S. Bonds |
| Commodity ETF | SPDR Gold Shares (GLD) | Gold |
| Sector ETF | Vanguard Energy ETF (VDE) | Energy Sector |
The table shows the wide variety of ETFs available, covering different asset classes and themes27. This variety lets you customize your portfolio to fit your needs, making ETFs a key investment tool26.
“ETFs have become one of the most popular investment vehicles in recent years, as they offer several key benefits, including instant diversification, low costs, and accessibility.”
ETFs are growing in popularity because they offer a simple way to invest in many assets and markets26. With their low fees28 and commission-free trading28, they’re a top choice for both new and seasoned investors. They help build wealth through diversified, affordable investing262728.
best investments
Building long-term wealth means looking at many options. It’s important to balance high returns with the risk you can handle29. Morningstar found 20 top stocks with strong economic moats and great capital use, showing they’re worth more than their current price29. The goal is to buy shares of strong companies at a lower price, focusing on those with big competitive edges29.
For diversifying your portfolio, Morningstar suggests 20 top funds for core investments29. These funds have Gold ratings and full analyst coverage, promising to beat the market over time29.
High-Return Potential
The stock market often beats bonds, savings accounts, and other investments over the long haul30. Over 40 years, U.S. stocks have led most investment types30. For example, a $10,000 investment at 10% annual returns for 30 years could grow to almost $175,00030.
Diversification Across Asset Classes
Spreading your investments across different types is key to managing risk and growing wealth31. Real estate and stocks are top choices for many Americans31. Gold and cryptocurrencies like Bitcoin are also good for diversifying your portfolio30.
Financial experts recommend investing in stocks based on your age, like subtracting your age from 11030. For a 40-year-old, about 70% of your portfolio could go to stocks30. Remember, taxes play a big role in your investment choices, affecting your financial success30.
Choosing a mix of high-return investments and diversifying helps build a strong portfolio. This approach matches your financial goals and risk level, leading to long-term wealth.
Dividend Stocks
Dividend stocks are great for those looking for steady income and the chance for growth. These stocks give out cash dividends regularly. This makes them a solid choice in uncertain markets32.
The average dividend yield for top dividend stocks is 3.33%, with some as high as 9.46% and as low as 3.03%32. About 30% of these top stocks are “dividend aristocrats”. These are S&P 500 companies that have raised their dividends for over 25 years32. These companies are known for steady dividends and growth potential. They are a favorite among investors who value stability and income.
The Allure of Dividend Aristocrats
Dividend aristocrats stand out for their steady dividend growth and financial strength. 70% of the top dividend stocks have a strong “narrow” Morningstar economic moat rating. 30% have an even stronger “wide” moat rating, showing they can keep their edge and stay strong through tough times32. These companies are often in sectors like tech, healthcare, and consumer staples. These sectors tend to be more stable during economic ups and downs.
“Dividend stocks can increase the historical total annual return by about two percentage points higher than the index’s annual change in value.”33
People like dividend stocks for their mix of income and growth. A $5,000 investment growing at 6% a year for 20 years could hit over $16,000. But the same investment growing at 8% a year could reach over $24,00033. This shows how dividend stocks can lead to higher returns than stocks without dividends.
When picking dividend stocks, look for companies with a strong history of paying dividends and growth potential. Adding dividend stocks, especially dividend aristocrats, to a diverse portfolio can offer steady income and the chance for long-term growth343233.
Real Estate Investments
Real estate is a top choice for investors looking for steady income and long-term growth35. In 2022, 29 percent of Americans picked real estate as their top investment for money they won’t need soon35. With a 7.09 percent annual interest rate in January 2024, real estate looks appealing for stable income35.
Investing in real estate directly can be costly and time-consuming. But, there are easier ways like real estate crowdfunding and REITs36. From the 1960s to 2007, new home prices went up, then fell during the crisis, and now they’re back up again36. By late 2023, the average home price in the U.S. was $498,300, close to the all-time high36.
Real estate crowdfunding lets investors join in with less money, thanks to professional management36. These platforms offer returns from 2% to 20% a year, says Investopedia36. REITs also offer a way to invest in many properties at once, trading like stocks36.
Adding real estate to your portfolio through crowdfunding or REITs can make it more diverse35. By the third quarter of 2023, 66 percent of U.S. homes were owned, similar to 2022’s rate35. But, owning a home is more common among those over 65 than those under 3535.
Real estate can offer a steady income and growth potential, making it a solid choice for diversifying your investments and reaching your financial goals.
| Metric | Value |
|---|---|
| Average Home Sale Price (2023) | $498,30036 |
| Annualized Returns of Real Estate Crowdfunding | 2% – 20%36 |
| Overall Homeownership Rate (Q3 2023) | 66%35 |
| Homeownership Rate for Those 65+ (Q3 2023) | 79.2%35 |
| Homeownership Rate for Those Under 35 (Q3 2023) | 38.3%35 |
“Real estate has historically been one of the best-performing asset classes, offering the potential for steady rental income and long-term appreciation.”
In summary, real estate investments, like crowdfunding and REITs, offer diversification, stable income, and growth potential. With many options and a strong real estate market history, it’s clear why many Americans choose real estate for their financial goals.
Conclusion
To succeed in investing in 2024 and beyond, focus on a balanced portfolio. This balance includes portfolio diversification, risk management, and long-term wealth building37. Start by knowing your risk level and financial goals. Then, spread your money across different types of investments.
Use low-risk options like high-yield savings accounts and government bonds. Also, include higher-risk investments such as stocks, real estate, and alternative assets. This mix helps you handle market ups and downs and grow your wealth over time38.
Keep an eye on your investments and adjust them as needed. This ensures your money matches your changing financial needs and risk comfort level38. Remember, sticking to your investment plan is key for long-term success, even when markets change39. Also, consider investing in different places, like the US, and work with a tax expert for the best tax strategy.
By managing your investments wisely, focusing on portfolio diversification, risk management, and long-term wealth building, you can confidently face the financial world. This approach helps you reach your financial goals39.
FAQ
Why should I invest?
What are the benefits of high-yield savings accounts?
What are the key features of Certificates of Deposit (CDs)?
Why are government bonds considered a low-risk investment?
How do corporate bonds differ from government bonds?
What are the benefits of money market mutual funds?
Why are mutual funds a popular investment choice?
What are the key benefits of index funds?
How do Exchange-Traded Funds (ETFs) work?
What are the best investment options for 2024?
Source Links
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