Investing is an absolute necessity when it comes to being able to afford a comfortable future, especially after you retire. A stable economy and a stable job can quickly change, which can leave you scrambling if you don’t have another way to make money. Those who hold onto their investments for the long haul can do quite well for themselves with or without a full-time job.
Investing is one of the best methods for growing your wealth. Unfortunately, learning about different types of investments and determining which ones are right for you can be confusing. In 2021, there are a ton of options available for investments.
Consider These Investments in 2021
High-yield Savings Accounts
High-yield savings accounts pay you interest based on your balance. You may currently have a savings account at your local bank, but it won’t ever pay you as much interest as a high-yield savings account. These accounts have very few overhead costs, and you can earn higher interest rates at online banks than you can at your local branch. Not only that, but you can access the money in your account easily by transferring it to your bank.
A high-yield savings account works well for everyone, especially those who don’t like to take on much risk. It can also help you earn money short term, and you won’t have to worry about losing money.
There is almost no risk in investing in these accounts because banks that offer them are FDIC-insured.
Certificates of Deposit
A certificate of deposit, also known as a CD, is issued by a bank and typically offers higher interest rates than any savings account. CDs are federally insured and have maturity dates that range from a few weeks to several years. Unlike a savings account, you cannot withdraw the money at any time. Instead, you must wait until a specified date to withdraw money without paying the penalty.
When you have a CD, the bank pays you interest at intervals, and once it matures, you’ll get your original principal back plus accrued interest.
CDs are one of the safest investments that offer high payouts, making them a great choice for retirees or younger people who are entering the world of investment.
Government Bond Funds
Government bonds are mutual funds that invest in debt securities, are issued by the US government and other agencies. These funds invest in debt instruments, including
Government bond funds are mortgage-backed and issued by government-sponsored enterprises like Fannie Mae. They are best suited for low-risk investors. They can also be a great choice for first-time investors or those who need additional cash flow.
Municipal bonds funds invest in municipal bonds, also known as munis, which are issued by state and local governments. The interest earned on these bonds is free of federal income tax and may be exempt from local and/or state taxes. These are attractive investments for those in high-tax states or high-income tax brackets.
Municipal bonds can be bought individually through an exchange-traded fund or a mutual fund.
Dividend Stock Funds
Stocks that pay dividends are another great safe investment choice for 2021. Dividends are portions of a company’s profit that are paid out to shareholders every quarter. With a dividend stock, you can gain your investment through market appreciation and earn money short term. Purchasing stocks is typically not recommended for new investors because it takes a lot of knowledge.
Dividend stocks work best for stock investors and those looking for additional income. Unfortunately, dividend stocks come with a risk, even if they are safer than other types of stocks.
Real estate is typically a good investment, especially now that housing prices are continuing to rise. Rental properties are a great investment if you can manage your properties or hire someone who can do it for you. Mortgage rates are continuing to remain low, making now, the best time to finance a new property.
You can do very well with rental properties as a real estate investor. However, you’ll have to handle selecting the right property, taking out a mortgage, buying it outright, maintaining it, or dealing with tenants. If you hold your rental property assets for a long time and gradually pay down your debt while raising rent, you’ll have powerful cash flow when it comes time to settle down and retire.
Rental housing investments are great for long-term investors who can manage their properties to generate cash flow. However, these investments do carry risks, such as overpaying for housing and a lack of liquidity.
Cryptocurrency is a digital currency you can exchange. Bitcoin is the first and leading cryptocurrency and has become a popular topic over the last few years. Cryptocurrencies, like Bitcoin and Ethereum, are one of the riskiest investment opportunities because they are volatile and prone to dramatic shifts. The price of crypto depends on what someone is willing to pay for, and it’s not backed by any government institution. Essentially, investors run the risk of losing all of their money.
Crypto is best for high-risk-seeking investors who have money to spare and won’t be bothered seeing their investment go to zero in exchange for high returns. Crypto is not a good choice for low-risk investors who prefer little risk and more assurance.
The good news about cryptocurrency is that it’s liquid, and you can buy and sell them whenever you want.
Final Thoughts on 2021 Investments
Deciding on the right investment for you depends on numerous factors, including your ability to deal with risk, when you need the money, and your knowledge. New investors should stay clear of risky investments right off the bat to ensure they can make enough money.
If you want to grow wealth, you can choose several low-risk investments that pay a moderate return. Remember, the more risk, the higher the reward.
This article originally appeared on The Financially Independent Millennial and was republished with permission.