assets for years or even decades. Determining which long-term investments best
suit you will ultimately depend on your risk tolerance and financial goals.
To help you decide,
here are a few long-term investment options you can consider.
Stocks
Stocks are perhaps the
top choice for investing long term. With stocks, there are several investment
options. You can bet on individual stocks, or you can choose equity index funds
and exchange-traded funds (ETFs), which many investors usually go for.
Stock-focused funds,
such as the S&P 500 index fund, allow you to own small portions of
different stocks simultaneously. Plus, your portfolio gets the fund’s
diversification benefit, reducing the risk of any investment that is making you
lose money.
Another long-term
investments under stocks are growth funds which are ETFs or mutual funds that
invest in growth stocks.
Instead of
dividend-paying companies, growth funds focus on companies with excellent
earnings or revenue growth. That means growth funds generate returns for
investors through quick price appreciation.
On the other hand,
value funds invest in companies considered undervalued in price based on
fundamental factors.
Value funds can provide
stability to your portfolio since they focus on steadier, well-established
firms with long records of paying consistent dividends, despite the possibility
that their future growth could slow down.
Growth funds tend to
perform well when interest rates are low, and economies are expanding.
Meanwhile, value funds have proven to do well when the economy is shrinking,
and the funds utilized by growth companies to support their development have
run out.
Cryptocurrencies
Investors willing to
take the risk can consider holding some crypto investments for the long term.
However, that approach may seem unideal, knowing that cryptocurrencies have
only been present for more than ten years and are highly volatile.
Still, there are
certain cryptocurrencies that you can buy and hold for long periods. You can
put money into a few individual coins, or you can consider other options to
enter the crypto market.
That said, you always
need to practice caution when investing in cryptocurrencies because not only
are they very volatile, their value is also unproven. Therefore, a good move
you can do is to put only a small portion of your investment dollars into these
digital assets.
Bonds
Bonds are another
long-term investment option to consider, especially if you want something less
risky than stocks and stock-focused funds. Indeed, bonds are less risky as they
provide a steady flow of income and holders the right to receive payment before
stockholders if the company goes bankrupt.
Government bonds tend
to be the safest ones, while company bonds can be classified into low-risk,
high-quality, and junk bonds with attractive interest rates and a high risk of
default.
Many choose bond funds
over individual bonds, as these bonds can be pretty difficult to purchase, and
individual investors need to have some diversification.
Moreover, the income
from bonds is relatively small at the moment, with the current interest rates
being considerably low. Several investors expect interest rates to climb soon,
which is likely to cause numerous bonds to drop in value.
Nevertheless, excellent
long-term bonds can still offer
income for investors while dealing with less volatility than stocks. Some
of the excellent long-term bonds funds include bonds funds and ETFs, and
government bonds, such as Treasury inflation-protected securities (TIPS) and I
bonds.