Top Long-Term Investments for 2024: A Comprehensive Guide

The best way to grow your money is by investing in the market. But with so many options, it can feel overwhelming to know where to start. Going for long-term investments is a smart move. Holding onto assets for years or decades works in your favor. To help newbies, we've listed some top long-term investments. Each has its own risks and rewards. Use these tips as a guide, but make sure to choose what fits your risk tolerance and financial goals.

Financial Advisors are Helpful

Consider hiring a financial advisor if you're ready to invest but aren't sure how to manage your portfolio. A good advisor will assess your risk tolerance, goals, and other factors to create a tailored investment plan and manage it for you. If you don't know where to find an advisor, check out Wiser-Advisor or Smart-Advisor from Smart-Asset. They can help you find a suitable advisor. Alternatively, Robo-advisors are a great low-cost option for smaller investors.

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Tips When Choosing Long-Term Investments

When it comes to long-term investing, it's about picking the right investments and using smart strategies. Here are some tips:

• Fees are vital: Be aware of the fees for ETFs or mutual funds. These can range from near zero to over 1% per year and can significantly impact your returns. Use tools like FINRAs Fund Analyzer to compare fees.
• Contribute to investment accounts periodically: This strategy, known as dollar-cost averaging, helps you buy more shares at lower prices and fewer at higher prices.
• Try to diversify all your investments: Don't just stick to stocks; include fixed-income investments and cash to protect against market volatility and provide liquidity.
• Learn about your risk tolerance: Determine how much risk you're comfortable with before investing. This will help you build a portfolio that suits you. Tools like the Vanguards Investor Questionnaire can help with this.
• Try to plan with a long-term view: Stay committed even during market dips. History shows that markets recover, so being consistent can pay off in the long run.

Roth IRA: Maximize Retirement Savings

A Roth IRA is pretty awesome for retirement savings. You put in after-tax money, let it grow tax-free, and then take it out tax-free. Plus, you can pass it on to your heirs without them paying taxes. It's a cool alternative to the traditional IRA. If you're earning money and want to build up tax-free assets for retirement, a Roth IRA is your friend.

A Roth IRA isn't an investment itself; it's like a special wrapper that gives your account tax benefits. If you choose a top brokerage for Roth IRAs, you can invest in almost anything. If you're not into risks and want guaranteed income, an IRA CD is a safe bet. Just remember to stick to the plan's rules to avoid taxes on the interest. If you're up for a bit more risk, you can invest in stocks and stock funds for potentially higher returns, all tax-free. Just be ready to handle the ups and downs of the stock market.

Robo-Advisor Portfolio: Automated Investing

With a robo-advisor, you just put money in, and it invests for you based on your goals, timeline, and risk tolerance. You answer some questions at the start, and it takes care of the rest, usually picking low-cost ETFs for your portfolio. If you'd rather not handle investing yourself, robo-advisors are a solid choice. You can set the account to be as aggressive or conservative as you like. Want all stocks? Go for it. Prefer cash or a savings account? Wealth Front and Betterment can do that, too.

The risk depends on what you invest in. More stocks mean more volatility, while bonds or cash mean less. So, it's all about what you own. Potential returns vary based on your investments. Stocks can bring high returns, while safer assets like cash offer lower returns. A robo-advisor usually builds a diversified portfolio for more stable returns, though it might lower the overall return a bit.

Small-Cap Stocks: High Growth Potential

Small-cap stocks are the shares of smaller companies that can grow quickly or tap into emerging markets. Think about how Amazon started small and made early investors rich. Small-cap stocks are often high-growth, but not always. If you're up for doing some homework and analysis, small-caps can be a goldmine of overlooked stocks. But be prepared for more volatility than with bigger companies.

Small-cap stocks are generally riskier because these companies have fewer resources and less market power. Their prices can drop quickly during tough market periods. You need to be able to analyze these companies, which takes time and effort. Finding a successful small-cap stock can lead to huge returns, like 20% annually or more if you pick a hidden gem early on.

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Real Estate: Top Long-Term Investment

Real estate is often seen as a top long-term investment. It requires a good chunk of money to start, high commissions, and usually pays off over many years. You can borrow most of the investment money from the bank and pay it back over time. If you want to be your own boss, owning property is a great way to do it, with lots of tax benefits. But it might take some active management, especially if you're renting out the property.

Borrowing a lot of money adds pressure for the investment to succeed. Even if you buy with cash, you'll have a lot tied up in one asset, which can be risky if something goes wrong. Plus, you'll still have to cover the mortgage and maintenance costs even without a tenant. The potential rewards are high if you pick a good property and manage it well, especially over the long term. Paying off the mortgage can lead to more stability and cash flow, making it a solid option for older investors.

Target-Date Funds: Simplify Retirement Planning

Target-date funds are perfect if you don't want to manage your own portfolio. They get more conservative as you get older, shifting from aggressive stocks to safer bonds as you near retirement. Where to get them: They're popular in 401(k) plans but can be bought outside of them too. You just pick your retirement year, and the fund does the rest.

These funds carry the same risks as stock and bond funds. If your target date is far off, the fund will have more stocks and be more volatile. As the date gets closer, it shifts to bonds, becoming less volatile but also earning less. Some advisors suggest picking a target-date fund that's five or ten years past your actual retirement date to get more growth from stocks. The returns depend on the fund's investments: more stocks mean higher long-term returns, while more bonds mean lower returns.

Value Stocks: Cheaper Investment Avenue

When the market really takes off, a lot of stocks get pricey. That's when some folks look at value stocks to play it safe and still make some good returns. Value stocks are cheaper based on things like the price-earnings ratio, which shows how much you're paying for each dollar of earnings. They're the opposite of growth stocks, which grow faster and are usually more expensive. Value stocks are great when interest rates are going up. They're less volatile and have a lower downside risk, making them perfect for investors who don't like taking big risks.

Value stocks typically don't drop as much when the market falls and can still rise when the market goes up. They might even go up faster than other stocks if the market likes them again. Plus, many value stocks pay dividends, so that's some extra cash in your pocket. You can also get fractional shares with a smaller capital outlay.

Dividend Stocks: Steady Income

Think of growth stocks as sports cars and dividend stocks as reliable sedans. They give solid returns but don't zoom up like growth stocks. Dividend stocks pay out regular cash, usually from older, more established companies. They're popular with older investors because they provide steady income, and some even increase their payouts over time. REITs are a common type of dividend stock. Perfect for long-term investors who want less volatility and enjoy or need regular cash payouts.

They're usually less volatile than growth stocks, but they can still swing up and down, especially in a tough market. If a company can't afford its dividend, it might cut it, which can hurt the stock price. The big draw is the payout. Top companies might pay 3 or 4 percent annually and can increase that by 8 or 10 percent each year. The best ones, called Dividend Aristocrats, have been doing this for over 25 years. The returns might not be as high as growth stocks, but they're steady. You can also go for a dividend stock fund for a diversified set of stocks.

Bond Funds: Stable Investments

A bond fund, whether a mutual fund or ETF, holds a bunch of bonds from different issuers. They're usually categorized by things like duration, risk, and issuer type (corporate, municipal, or federal). When a company or government issues a bond, it pays interest annually and repays the principal at the end. Great for investors who want a mix of bonds without the hassle of buying individual ones. Also good for those without enough money to buy a single bond, which usually costs around $1,000. Bond ETFs can be bought for less than $100.

Bond funds are pretty stable but can move with interest rate changes. Bonds are safer than stocks, but not all bonds are created equal. Government bonds are usually the safest. Bonds are one of the safer investments and even safer in a fund. A fund diversifies its holdings, reducing the impact if one bond defaults. Returns are typically lower than stock funds, around 4 to 5 percent annually, but they are less risky. There are plenty of bond fund options to choose from.

Stock Funds: Simplify Investing

A stock fund is a collection of stocks, often grouped by a theme like American stocks or large stocks. The fund company charges a fee, but its usually low. Ideal if you don't want to spend time analyzing individual stocks. A stock fund, whether an ETF or mutual fund, is great for investors who want to be aggressive with stocks but don't want to make investing their full-time job.

It is less risky than buying individual stocks and requires less work, but it can still swing a lot in a year. If you buy a fund thats not broadly diversified, like one focused on a single industry, it can be riskier. It is easier to manage than individual stocks and has more stable returns because you own more companies. A broadly diversified fund, like an S&P 500 index fund, will have a mix of high-growth stocks and others, giving you a safer set of companies. You get the average return of all the companies in the fund, making it less volatile than holding just a few stocks.

Growth Stocks: High-Risk High Returns

Growth stocks are like Ferraris in the stock world. They offer high growth and high returns. Often, tech companies, they usually reinvest profits back into the business instead of paying dividends. If you're up for analyzing companies and can handle volatility, growth stocks are for you. You'll need a high-risk tolerance and be ready to hold for at least three to five years.

Growth stocks can be pricey and lose value quickly in a bear market or recession. Their popularity can disappear fast. But they've also been some of the best performers over time. The biggest companies, like Alphabet and Amazon, started as high-growth companies. The potential rewards are huge if you find the right one.

Conclusion

You don't need to be a financial guru to invest successfully. Just know the best long-term investments and strategies. If you're not comfortable doing it alone, get a good financial advisor. Your future financial success depends on making the right choices now.

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