Akin Investment looks ahead for the best investments of 2024
As you’re deciding what to invest in, you’ll want to consider a number of factors, including your risk tolerance, time horizon, your knowledge of investing and how much you can invest. If you’re looking to grow wealth, you can opt for lower-risk investments that pay a modest return, or you can take on more risk and aim for a higher return. Or you can take a balanced approach, having absolutely safe money investments while still giving yourself the opportunity for long-term growth.
The best investments for 2024 allow you to do both, with varying levels of risk and return.
Why invest?
Investing can provide you with another source of income, fund your retirement or even get you out of a financial jam. Above all, investing grows your wealth — helping you meet your financial goals and increasing your purchasing power over time. Or maybe you’ve recently sold your home or come into some money. It’s a wise decision to let that money work for you.
While investing can build wealth, you’ll also want to balance potential gains with the risk involved.
There are many ways to invest — from very safe choices such as CDs and money market accounts to medium-risk options such as corporate bonds, and even higher-risk picks such as stock index funds. That’s great news, because it means you can find investments that offer a variety of returns and fit your risk profile.
Here are the best investments for 2024:
High Yield Savings Accounts
Certificates of Deposit
Rental Housing
Government and Municipal Bond Funds
Corporate or High Yield Bond Funds
S & P 500, Nasdaq and Div. Stock Funds
Alternative Investments including, Gold, Crypto and other Real Estate including REITs
1. High Yield Savings Accounts
Just like a savings account earning pennies at your brick-and-mortar bank, high-yield online savings accounts are accessible vehicles for your cash. With fewer overhead costs, you can typically earn much higher interest rates at online banks. Plus, you can typically access the money by quickly transferring it to your primary bank or maybe even via an ATM.
A savings account is a good vehicle for those who need to access cash in the near future.
Risk: The banks that offer these accounts are FDIC-insured, so you don’t have to worry about losing your deposit. While high-yield savings accounts are considered safe investments, like CDs, you do run the risk of earning less upon reinvestment due to inflation.
Liquidity: Savings accounts are about as liquid as your money gets. You can add or remove the funds at any time, though your bank may legally limit you to as few as six withdrawals per statement period, if it decides to do so.
2. Certificate of Deposits
Certificates of Deposit, or CDs, are issued by banks and generally offer a higher interest rate than savings accounts. These federally-insured time deposits have specific maturity dates that can range from several weeks to several years. Because these are “time deposits,” you cannot withdraw the money for a specified period of time without penalty.
With a CD, the financial institution pays you interest at regular intervals. Once it matures, you get your original principal back plus any accrued interest. It pays to shop around online for the best rates.
Because of their safety and higher payouts, CDs can be a good choice for retirees who don’t need immediate income and are able to lock up their money for a little bit. But there are many kinds of CDs to fit your needs, and so you can still take advantage of the higher rates on CDs.
Risk: CDs are considered safe investments. But they do carry reinvestment risk — the risk that when interest rates fall, investors will earn less when they reinvest principal and interest in new CDs with lower rates, as we saw in 2020. The opposite risk is that rates will rise and investors won’t be able to take advantage because they’ve already locked their money into a CD.
Consider laddering CDs — investing money in CDs of varying terms — so that all your money isn’t tied up in one instrument for a long time. It’s important to note that inflation and taxes could significantly erode the purchasing power of your investment.
Liquidity: CDs aren’t as liquid as savings accounts or money market accounts because you tie up your money until the CD reaches maturity — often for months or years. It’s possible to get at your money sooner, but you’ll often pay a penalty to do so.
3. Rental Housing
Rental housing can be a great investment if you have the willingness to manage your own properties. It could be a great time to finance the purchase of a new property, though the unstable economy may make it harder to actually run it. Some tenants may be more likely to default due to unemployment.
To pursue this route, you’ll have to select the right property, finance it or buy it outright, maintain it and deal with tenants. You can do very well if you make smart purchases. However, you won’t enjoy the ease of buying and selling your assets in the stock market with a click or a tap on your internet-enabled device. Worse, you might have to endure the occasional 3 a.m. call about a broken pipe.
But if you hold your assets over time, gradually pay down debt and grow your rents, you’ll likely have a powerful cash flow when it comes time to retire.
Risk: As with any asset, you can overpay for housing, as investors in the mid-2000s found out. With low interest rates and a tight housing supply, housing prices ran up in 2020, despite the struggles facing the economy as a whole. Also, the lack of liquidity might be a problem if you ever needed to access cash quickly.
Liquidity: Housing is among the least liquid investments around, so if you need cash in a hurry, investing in rental properties may not be for you (though a cash-out refinance is possible). And if you sell, a broker may take as much as 6 percent off the top of the sales price as a commission.
4. Government Bond Funds
Government bond funds are mutual funds or ETFs that invest in debt securities issued by the U.S. government and its agencies.
The funds invest in debt instruments such as T-bills, T-notes, T-bonds and mortgage-backed securities issued by government-sponsored enterprises such as Fannie Mae and Freddie Mac. These government bond funds are well-suited for the low-risk investor.
These funds can also be a good choice for beginning investors and those looking for cash flow.
Corporations sometimes raise money by issuing bonds to investors, and these can be packaged into bond funds that own bonds issued by potentially hundreds of corporations. Short-term bonds have an average maturity of one to five years, which makes them less susceptible to interest rate fluctuations than intermediate- or long-term bonds.
Corporate bond funds can be an excellent choice for investors looking for cash flow, such as retirees, or those who want to reduce their overall portfolio risk but still earn a return.
Risk: As is the case with other bond funds, short-term corporate bond funds are not FDIC-insured. Investment-grade short-term bond funds often reward investors with higher returns than government and municipal bond funds.
But the greater rewards come with added risk. There is always the chance that companies will have their credit rating downgraded or run into financial trouble and default on the bonds. To reduce that risk, make sure your fund is made up of high-quality corporate bonds.
Liquidity: You can buy or sell your fund shares every business day. In addition, you can usually reinvest income dividends or make additional investments at any time. Just keep in mind that capital losses are a possibility.
5. Dividend Stock Funds
Even your stock market investments can become a little safer with stocks that pay dividends.
Dividends are portions of a company’s profit that can be paid out to shareholders, usually on a quarterly basis. With a dividend stock, not only can you gain on your investment through long-term market appreciation, you’ll also earn cash in the short term.
Buying individual stocks, whether they pay dividends or not, is better-suited for intermediate and advanced investors. But you can buy a group of them in a stock fund and reduce your risk.
Risk: As with any stock investments, dividend stocks come with risk. They’re considered safer than growth stocks or other non-dividend stocks, but you should choose your portfolio carefully.
Make sure you invest in companies with a solid history of dividend increases rather than selecting those with the highest current yield. That could be a sign of upcoming trouble. However, even well-regarded companies can be hit by a crisis, so a good reputation is finally not a protection against the company slashing its dividend or eliminating it entirely.
Liquidity: You can buy and sell your fund on any day the market is open, and quarterly payouts are liquid. To see the highest performance on your dividend stock investment, a long-term investment is key. You should look to reinvest your dividends for the best possible returns.
If you want to achieve higher returns than more traditional banking products or bonds, a good alternative is an S&P 500 index fund, though it does come with more volatility.
The fund is based on hundreds of the largest American companies, meaning it comprises many of the most successful companies in the world. For example, Amazon and Berkshire Hathaway are two of the most prominent member companies in the index.
Like nearly any fund, an S&P 500 index fund offers immediate diversification, allowing you to own a piece of all of those companies. The fund includes companies from every industry, making it more resilient than many investments. Over time, the index has returned about 10 percent annually. These funds can be purchased with very low expense ratios (how much the management company charges to run the fund) and they’re some of the best index funds.
An S&P 500 index fund is an excellent choice for beginning investors, because it provides broad, diversified exposure to the stock market.
Risk: An S&P 500 fund is one of the least-risky ways to invest in stocks, because it’s made up of the market’s top companies. Of course, it still includes stocks, so it’s going to be more volatile than bonds or any bank products. It’s also not insured by the government, so you can lose money based upon fluctuations in value. However, the index has done quite well over time.
6. S & P 500 and NASDAQ Funds
Nasdaq-100 index fund offers you immediate diversification, so that your portfolio is not exposed to the failure of any single company. The best Nasdaq index funds charge a very low expense ratio, and they’re a cheap way to own all of the companies in the index.
Risk: Like any publicly traded stock, this collection of stocks can move down, too. While the Nasdaq-100 has some of the strongest tech companies, these companies also are usually some of the most highly valued. That high valuation means that they’re likely prone to falling quickly in a downturn, though they may rise again during an economic recovery.
Liquidity: Like other publicly traded index funds, a Nasdaq index fund is readily convertible to cash on any day the market is open.
7. Alternative Investments including, Gold, Crypto and
other Real Estate including REITS.
In this category its important to consider it as a backup. For instance, Gold Coins may be more attractive than a gold fund as they are tangible and you can take possession of them. REITs or other types of Unit Investment Trusts though a paper investment most are based on the assets they are tied too.
Remember its always a good idea to have a
professional review or secondary opinion and guide you through the selection process.
What to Consider
As you’re deciding what to invest in, you’ll want to consider a number of factors, including your risk tolerance, time horizon, your knowledge of investing and how much you can invest.
If you’re looking to grow wealth, you can opt for lower-risk investments that pay a modest return, or you can take on more risk and aim for a higher return. Or you can take a balanced approach, having absolutely safe money investments while still giving yourself the opportunity for long-term growth.
The best investments for 2024 allow you to do both, with varying levels of risk and return.
As you’re deciding what to invest in, you’ll want to consider a number of factors, including your risk tolerance, time horizon, your knowledge of investing and how much you can invest.
If you’re looking to grow wealth, you can opt for lower-risk investments that pay a modest return, or you can take on more risk and aim for a higher return. Or you can take a balanced approach, having absolutely safe money investments while still giving yourself the opportunity for long-term growth.
The best investments for 2024 allow you to do both, with varying levels of risk and return.
Risk tolerance
Risk tolerance means how much you can withstand when it comes to fluctuations in the value of your investments. Are you willing to take big risks to potentially get big returns? Or do you need a more conservative portfolio? Risk tolerance can be psychological as well as simply what your personal financial situation requires.
Conservative investors or those nearing retirement may be more comfortable allocating a larger percentage of their portfolios to less-risky investments. These are also great for people saving for both short- and intermediate-term goals. If the market becomes volatile, investments in CDs and other FDIC-protected accounts won’t lose value and will be there when you need them.
Those with stronger stomachs and workers still accumulating a retirement nest egg are likely to fare better with riskier portfolios, as long as they diversify. A longer time horizon allows you to ride out the volatility of stocks and take advantage of their potentially higher return, for example.
Time Horizon
Time horizon simply means when you need the money. Do you need the money tomorrow or in 30 years? Are you saving for a house downpayment in three years or are you looking to use your money in retirement? Time horizon determines what kinds of investments are more appropriate.
If you have a shorter time horizon, you need the money to be in the account at a specific point in time and not tied up. And that means you need safer investments such as savings accounts, CDs or maybe bonds. These fluctuate less and are generally safer.
If you have a longer time horizon, you can afford to take some risks with higher-return but more volatile investments. Your time horizon allows you to ride out the ups and downs of the market, hopefully on the way to greater long-term returns. With a longer time horizon you can invest in stocks and stock funds and then be able to hold them for at least three to five years.
It’s important that your investments are calibrated to your time horizon. You don’t want to put next month’s rent money in the stock market and hope it’s there when you need it.
Your Knowledge
Your knowledge of investing plays a key role in what you’re investing in. Investments such as savings accounts and CDs require little knowledge, especially since your account is protected by the FDIC. But market-based products such as stocks and bonds require more knowledge.
If you want to invest in assets that require more knowledge, you’ll have to develop your understanding of them. For example, if you want to invest in individual stocks, you need a great deal of knowledge about the company, the industry, the products, the competitive landscape, the company’s finances and much more. Many people don’t have the time to invest in this process.
However, there are ways to take advantage of the market even if you have less knowledge. One of the best is an index fund, which includes a collection of stocks. If any single stock performs poorly, it’s likely not going to affect the index much. In effect, you’re investing in the performance of dozens, if not hundreds, of stocks, which is more a wager on the market’s overall performance.
So you’ll want to understand your knowledge and its limits as you think about investments.
How Much You Can Invest
How much can you bring to an investment? The more money you can invest, the more likely it’s going to be worthwhile to investigate higher-risk, higher-return investments.
If you can bring more money, it can be worthwhile to make the time investment required to understand a specific stock or industry, because the potential rewards are so much greater than with bank products such as CDs.
Otherwise, it may not simply be worth your time. So you may stick with bank products or turn to ETFs or mutual funds that require less time investment. These products can also work well for those who want to add to the account incrementally, as 401(k) participants do.
Do you have immediate expenses that you may have trouble paying?
Do you have an emergency fund with at least six months of spending saved up?
Do you have substantial outstanding debt?
It’s important to have your current financial situation under control before you can invest.
You have multiple ways to invest your money, including the options above. If you want to invest in stocks, bonds or funds, you’ll need to have an account with a broker. If you’d prefer to have someone else do the investing for you, one excellent option is to turn to a robo-advisor. You’ll pay a small management fee and the robo-advisor handles the rest.
If you’re a new investor, consider sticking with investment choices that are on the safer side. Investments such as an S&P 500 index fund or Nasdaq-100 index fund tend to be safer than individual stocks. A robo-advisor can help you with these choices, too, and the cost is reasonable.
Bottom Line
Investing can be a great way to build your wealth over time, and investors have a range of investment options, from safe lower-return assets to riskier, higher-return ones. That range means you’ll need to understand the pros and cons of each investment option to make an informed decision.
While it seems daunting at first, many investors manage their own assets. But the first step to investing is actually easy: opening a brokerage account. Investing can be surprisingly affordable even if you don’t have a lot of money.