Long Term Investments

Long-Term Investments

As a financially savvy person, you’re undoubtedly looking at different ways to grow your money. If you’re planning to buy a house in the future, increase your emergency fund or prepare for retirement, you need to save your money.

Opening a basic savings account can get your financial plan off to a good start. But basic savings accounts don’t offer the highest return on your money. If you want to grow your money, you need to explore long-term investing.

Long-term investments can be intimidating, especially if you’re not familiar with options available to you. There’s also the risk of losing money, which can be scary. On the other hand, investing your money offers an opportunity to grow your earnings at a tremendous rate — and with more growth, you can reach your long-term savings goals.

If you’re considering investing your money, look into long-term investment strategies. These are investments you’ll keep for a year or longer. The longer you hold onto an investment, the more money you can potentially earn.

But you might ask, what is the right long-term investment for me? There are several options that might be up your alley. For example:

Real Estate

If you’re thinking long-term, investing in real estate might be the perfect match. Real estate can be extremely profitable. But it takes money to get started.

For a long-term approach, you can buy and rent out your properties. You can purchase foreclosures and other below market value properties, fix up these properties, and then rent to tenants at market value. This results in consistent monthly income. Or you can buy a multi-family property and live in one unit while renting out the other.

To illustrate, let’s say you purchase a foreclosure. You might have a mortgage payment of $500. But if you’re able to rent this property for $1,200 a month, that $700 profit every month. You’ll have to pay taxes on the profit, but what’s left can go toward building your emergency fund or preparing for retirement.

Stocks

Investing in the stock market can be extremely risky. However, if you keep your money in the market long-term, you might strike gold.

Stocks are shares in a company. By investing in stocks, you have a share of ownership in the company. Stock prices vary depending on a company’s value. When stock prices increase, you can sell your shares for a profit. But if you sell when stock prices are down, you might sell stocks for less than you paid and lose money.

As a long-term investment, you can purchase shares in a relatively young company and hold onto the stock for several years. As the company grows and its stock value increases, you can potentially sell and profit tremendously.

Let’s say you get in on the ground floor and buy 100 shares in a company for $10 per share. Fast forward 10 years and the company’s stock might sell for $200 a share. You can sell your shares and walk away with $20,000.

Bonds

Bonds are another long-term investment. By investing in bonds, you’re basically lending money to the government or a corporation. The company promises to pay you back over time, and you’ll also earn interest on the amount. The longer the bond term, the more interest you can earn.

Bond interest rates vary. Since government bonds are safer and guaranteed, you earn a lower rate on these bonds. You can also loan money to a private corporation, but these are riskier since the company might experience hardship and be unable to repay. Due to the risky nature, corporate bonds have higher interest rates, which means you can earn more.

Since bonds return principal and interest payments throughout the term, you can receive consistent income. Bonds are safer than stocks, but they don’t typically offer the same return as stocks.

Mutual Funds

Mutual Funds are a collection of stocks, bonds and other securities. With this type of investment, you’ll pool funds with other investors. A funds manager handles the fund and determines the best strategy to maximize returns. A mutual fund is ideal for long-term investing because it provides an opportunity to diversify your portfolio. This can reduce volatility, and you can have a balanced mix of safe and aggressive investments.

Certificate of Deposits

Do you like the idea of long-term investing, but you’re not ready to invest in stocks, bonds and mutual funds? Fortunately, there’s a guaranteed long-term investment strategy.

Certificate of deposits are a type of savings account. But unlike a regular savings account, you can earn a higher interest rate depending on how much you deposit into the account and your CD term.

Understand, however, that certificate of deposits are time deposits. By opening an account, you agree to leave your money in the bank for a specific length of time. You can open a CD for as little as 3 to 6 months, but you can also find CD terms as long as five or 10 years.

Certificate of deposits are an excellent option if you’re looking for a safe long-term investment strategy. You can’t lose because you’re guaranteed the return of your investment plus interest. These types of savings accounts are also beneficial if you know you won’t need your cash for a while. Taking an early withdrawal from a certificate of deposit can result in a penalty, as much as 3 to 6-month’s interest depending on the bank.

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