Savings and investments are essential for an individual to grow their net worth. Though many have difficulty or even fear when it comes to investing and saving, being educated on types of investments can help drive away from the anxiety and promote healthy saving and investing habits. Here are stable financial investments that every financially responsible adult should be aware of to help them make educated decisions on where and how to invest.
Stock Funds
Stock funds are great long-term investments that are mutual funds and perfect for investors who do not have time to study individual stocks. Stock funds feature diversification that pulls in various company’s not necessarily in the same industry. This pulling from different industries protects most of the funds if one of the industries is experiencing a downturn. Stock funds are lower risk than from other types of stocks because they are a diversified mutual fund. They are not totally without risks, but they are extremely low.
Growth Stocks
Growth stocks are investments in companies that show potential for large or high growth. This growth also offers high investment returns. These stocks were specifically developed with the idea that the dividends would be invested back in the company rather than directly paid out to investors. Investors still receive dividends but not as often as other stocks. Dividends generally come once the growth starts to slow down, so if you are in for the long-term and have patience, this type of stock can pay off big over time. Growth stocks have continually been the best stock performers overall because of long-term growth.
These stocks are considered high-risk because they can be vulnerable to market fluctuations. However, if you hold on to the stock’s long-term and ride out the storms, this stock is what a savvy investor needs to do to get a long-term pay-out on their investment.
Bond Funds
Bond funds are when a company or the government issues a bond. The government or company then pays the bondholder a fixed amount of interest each year. At the end of the term for the bond, the bond issuer’s initial principal investment is paid back. These funds are an excellent long-term investment due to their diversity and relatively low risk. While an excellent long-term investment has a lower pay off, if you are looking for higher return rates, they may not be where you want to place all your investment dollars.
Dividend stocks
A dividend stock is a stock that has a regular cash pay-out. These are popular stocks because dividend stocks produce a steady income. Dividend stocks also are the best stocks to grow dividends over time. Like all stocks, they are at higher risk because they are not diversified and are vulnerable to market fluctuations. However, these stocks are a great source of passive income when they are doing well as the dividends are paid quarterly.
Real Estate Investments
Real estate can be a highly rewarding investment due to the passive income over time as a rental property or a fix and flip. Real estate is a great long-term and short-term financial investment because of the control as the property can be sold at any time. Real estate investments can be highly rewarding and, in some cases, a more significant risk than the investor can tolerate.
Small-cap Stocks
Small-cap stocks are like growth stocks, the difference being that the companies are small. Small-cap stocks have a payoff that can be significant if the company you bought stock in grows substantially, and you are patient for the long-term.
IRA CD
An IRA CD is a good option if you are risk-averse and want a guaranteed income without any chance of loss. Like the name says, this investment is just a CD inside an IRA. And inside a tax-friendly IRA, you will avoid taxes on the interest you accrue if you stick to the plan’s rules.
Conclusion
Wherever you decide to invest, you must do so and have savings to grow your net worth. The above investments carry varying degrees of risk and reward. Still, if researched and done through a professional investment planner, these investments will offer the investor great options to have money for a strong financial future.
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