Investments: Top Ten Picks

There are many options for people looking to invest their money, each with its own pros and cons. Here are ten of the most common investments:

1. High-yield savings accounts: These accounts offer a much higher APY than traditional savings accounts, allowing you to maximise your returns without the risk of investing.

2. Long-term certificates of deposit (CDs): CDs are issued by banks and offer a higher interest rate than savings accounts. They are considered safe investments but do carry the risk of losing purchasing power over time due to inflation.

3. Long-term corporate bond funds: Corporate bonds are issued by companies to raise money and can be packaged into bond funds. They offer a higher return than government and municipal bond funds but are not FDIC-insured.

4. Dividend stock funds: Dividend stocks pay out portions of a company's profit to shareholders. Dividend stock funds are suitable for those looking for income and can be safer than other types of stocks.

5. Value stock funds: These funds invest in stocks that are more bargain-priced than others in the market. They tend to do better when interest rates rise.

6. Small-cap stock funds: These funds invest in stocks of smaller companies, which often have strong growth prospects.

7. Real estate investment trusts (REITs): REITs are a way to invest in real estate without the hassle of managing properties. They pay out dividends and can provide diversification to an investment portfolio.

8. S&P 500 index funds: These funds are based on the S&P 500 index, which comprises some of the largest and most successful companies in the world. They offer broad diversification and are one of the less risky ways to invest in stocks.

9. Nasdaq-100 index funds: These funds are based on the Nasdaq-100 index, which includes some of the biggest and best tech companies. They offer immediate diversification but can be volatile.

10. Rental housing: Investing in rental properties can be a great way to generate regular cash flow but requires the willingness to manage properties.

High-yield savings accounts

• UFB Direct High Yield Savings: Best for APY at all balance tiers
• Laurel Road High Yield Savings: Best for a full banking experience
• Varo Savings Account: Best for automated savings tools
• LendingClub Bank High-Yield Savings: Best for Trustpilot ratings
• Bask Bank Interest Savings Account: Best for no minimum deposit
• TAB Bank High Yield Savings: Best for no monthly fee
• Popular Direct High-yield Savings Account: Best for fully online banking
• First Foundation Online Savings Account: Best for ATM fee reimbursement
• Synchrony Bank High Yield Savings: Best for app ratings

When choosing a high-yield savings account, it's important to consider the interest rate, initial deposit, minimum balance, fees, compounding interest, and whether you prefer an online bank or a traditional bank.

Long-term certificates of deposit

Long-term CDs may be better options when you expect rates to fall, allowing you to keep your money earning higher rates for years. They can be a good choice for retirees who don't need immediate income and are able to lock up their money for a little while. CDs are also suitable for risk-averse investors, especially those who need money at a specific time and can tie up their cash in exchange for a higher yield than they'd find on a savings account.

When it comes to choosing a long-term CD, it's important to consider the interest rate, compounding schedule, minimum deposit, term, early withdrawal penalty, and customer experience. Online banks tend to offer the best CD rates, but it's still worth considering traditional banks and credit unions. It's also a good idea to shop around and compare options at different banks to find the highest CD rates.

• Popular Direct: Offers CDs with terms ranging from three months to five years, with a $10,000 minimum deposit.
• Vio Bank: Provides traditional CDs with terms from six months to 10 years and a minimum deposit of $500.
• America First Credit Union: Offers a wide range of CD terms between three and 60 months, with competitive rates and a manageable minimum opening deposit.
• Synchrony Bank: Offers regular CDs ranging from three months to five years, as well as a no-penalty CD and a bump-up CD.
• Marcus by Goldman Sachs: Features a variety of CD terms, including a six-month and six-year CD, with a $500 minimum deposit requirement.
• Sallie Mae Bank: Offers 11 CD terms, including a competitive yield and a $2,500 minimum deposit.
• Quontic Bank: Provides five CD terms, ranging from six months to five years, with a $500 minimum deposit and competitive rates.
• Barclays Bank: Offers nine CD terms, ranging from three months to five years, with competitive yields and no minimum opening deposit.
• Capital One: Offers CDs with terms as short as six months or as long as five years, with no minimum opening deposit and competitive yields.
• Citizens Access: Provides five CD terms, ranging from one to five years, with a $5,000 minimum deposit and competitive yields.

Long-term corporate bond funds

Investment-grade long-term bond funds often reward investors with higher returns than government and municipal bond funds. But the greater rewards come with some added risk.

You can buy and sell corporate bond funds with any broker that allows you to trade ETFs or mutual funds. Most brokers allow you to trade ETFs for no commission, whereas many brokers may require a commission or a minimum purchase to buy a mutual fund.

• SPDR® Portfolio Long Term Corp Bd ETF
• IShares 10+ Year Invmt Grd Corp Bd ETF
• Vanguard Long-Term Corporate Bd ETF
• Invesco Taxable Municipal Bond ETF
• IShares Core 10+ Year USD Bond ETF
• Vanguard Long-Term Bond ETF
• FlexShares Crdt-Scrd US Lng Corp Bd ETF

Dividend stock funds

When choosing a dividend stock fund, it is important to select companies with a solid history of dividend increases rather than those with the highest current yield, as this could be a sign of upcoming trouble. Even well-regarded companies can be hit by a crisis, so it is crucial to diversify your portfolio to reduce the risk of relying too heavily on any single company.

• Invesco Diversified Dividend
• BlackRock Equity Dividend Instl
• Fidelity High Dividend ETF
• Franklin U.S. Low Volatility Hi Div ETF
• Vanguard Dividend Appreciation ETF
• Vanguard High Dividend Yield ETF
• SPDR S&P 500 High Dividend ETF

Value stock funds

Vanguard, the largest mutual fund company in the world, offers a large selection of value stock funds. Their Vanguard Value Index Fund Admiral Shares Fund is one of the market's largest and most successful value funds, with over $143 billion in assets as of October 2022. The fund employs a long-term buy-and-hold approach, investing in stocks that make up the CRSP U.S. Large-Cap Value Index. It has returned 10.48% over the last 10 years and 7.06% over the last five years, with a low expense ratio of 0.05%.

Another option is the Vanguard Selected Value Fund, an actively managed fund targeting undervalued companies in the mid-cap range. As of October 2022, the fund had invested its $5.7 billion of assets in 129 stocks, with an average annual return of 8.79% over the last 10 years and a return of 3.37% over the last five years. Its expense ratio is considered low at 0.32%.

For investors looking for a more diversified approach, the Vanguard Small-Cap Value Index Fund captures the small-cap range of stocks, offering even greater upside potential. The fund has more than $45.2 billion in assets spread across 888 holdings consisting of small-cap stocks as of October 2022, with a 10-year return of 9.46% and a five-year return of 4.42%. Its expense ratio of 0.07% is considered extremely low.

When investing in value stock funds, it is important to remember that they come with risks. One concern is the market's potential misjudgment, where stocks deemed undervalued by fund managers might remain unrecognized, leading to stagnant or declining fund performance. Value stocks can also be sensitive to economic cycles and interest rate changes, which can impact their performance.

Frequently asked questions