By Dylan Bartlett
Are you looking to invest for the first time in 2020? If so, you likely have many questions. You’ve probably heard of stocks and bonds, but the markets today offer a host of options to explore.
The best investment strategy for you depends on your financial situation and goals. However, it pays to know all of your options. The following nine investment vehicles offer various ways to achieve your dreams.
1. Real Estate Investment Trusts
Real Estate Investment Trusts (REIT) are companies that own or finance income-producing properties across a range of areas and property sectors. These vehicles enable you to invest in things like office plazas and community redevelopment efforts, even if you don’t have access to massive income streams.
REITs empower anyone to invest in portfolios of real estate assets the same way they invest in other industries. Many REITs trade shares on the typical exchanges — if you have a 401k at work, it may contain these assets.
REITs often outperform leading U.S. benchmarks. Additionally, you can choose from different types. Consulting with a qualified financial planner can help you determine the kind that’s right for you.
2. Oil and Gas Partnerships
Oil and gas partnerships make excellent investments because you can reap considerable tax advantages. The risk to these investments is that they are illiquid, meaning once you put your money in, you can’t immediately cash out without potentially incurring a substantial loss.
However, considering you can write off up to 100% of your investment on your 1040, you may find the potential pitfalls worth it.
You can deduct tangible and intangible drilling costs as well as depletion. For example, for every $1,000 you receive from such an investment, $150 is tax-free due to depletion alone under current rules.
For years, investment gurus preached to buy gold to protect yourself in case the dollar falls. Given the volatility of the global market, this scenario is a real concern.
However, now, cryptocurrency offers an investment vehicle to protect yourself if the U.S. dollar sinks into disarray. After all, if you need to buy groceries, are you going to use a gold coin worth thousands of dollars to pick up some packets of ramen to sustain you?
The downside of investing in cryptocurrency is that the technology is so new, potential pitfalls exist. However, given the volatility of international markets, diversifying your portfolio with such investments can lead to greater peace of mind.
Many novice investors have some nodding acquaintance with the market, but if you hesitate to dive in, you’re not alone. Nevertheless, knowledge is power, and the information age makes it a snap to research companies and stocks online.
The crucial factor is to think long-term and avoid abandoning ship the minute an individual stock dips a bit. While you shouldn’t cling to investments that lose money continually, over time, the market tends to stabilize and offers a more substantial ROI than savings accounts.
Different types of bonds exist. If you’re looking to diversify your portfolio with more stable vehicles, consider these. If you’re averse to risk, professionals consider government bonds, such as federal treasury bonds, as credit-risk free.
This categorization occurs because the government backs your investments. You can also invest in corporate bonds or mortgage-backed bonds.
Futures are speculative investments, and if you’re seeking a big payoff and don’t mind risk, this vehicle may work for you.
These investments enable you to profit from short-term price movements and trends without owning the asset itself. You reserve the right to purchase the asset at a later date in a futures contract.
7. Mutual Funds
If you’re not yet ready to dive into the market — or if you lack time to study individual stocks — consider investing in mutual funds. These vehicles do the work of diversification for you — you put the money in, and they apply it across different markets.
The best part? You can find socially responsible mutual funds that support causes you also endorse. Make your money grow while giving to charity? Talk about a win-win!
Certificates of deposit provide higher interest than traditional or high-yield savings accounts, as they’re less liquid. With a CD, you invest your money for a specified period — such as six months to three years.
If you withdraw the money before the term elapses, you pay a penalty. However, if you stay the course, you reap a substantial reward.
9. Liquid Savings
It’s crucial to maintain liquid savings for life’s emergencies, even if you have a stable income. You should reserve three to six month’s worth of income in an emergency fund in case of unforeseen tragedies.
Additionally, it’s helpful to establish savings for things like holidays and vacations so that you don’t resort to using credit to fund these occasions.
Invest Wisely in 2020 for the Best Returns
Investing makes your money work for you. Determine the best strategy for your goals and watch your financial portrait improve in 2020.
This is actually really interesting and useful. I’ve considered investing a few times – especially in stocks, but not understanding the options has left me feeling unsure. Thanks for explaining the different ways and options!