Navigating The Investment Landscape: Strategies For Building A Solid Portfolio

There are many different types of investments, each with its own level of risk and potential reward. These include stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, and cryptocurrencies. The best approach for an individual depends on their risk tolerance, the amount of money they have to invest, and their time horizon, among other factors.

Some good options for those looking to invest include:

- High-yield savings accounts

- Long-term certificates of deposit (CDs)

- Long-term corporate bond funds

- Dividend stock funds

- Value stock funds

- Small-cap stock funds

- Real estate investment trusts (REITs)

- S&P 500 index funds

- Nasdaq-100 index funds

- Rental housing

High-yield savings accounts

The best high-yield savings rates currently range from 4.50% to 5.30% APY, far higher than the national average savings account rate of 0.36% to 0.47% APY.

• UFB Direct: 5.15% to 5.45% APY
• BrioDirect: 5.30% APY
• Ivy Bank: 5.30% APY
• Bask Bank: 5.10% APY
• Varo: 3.00% to 5.00% APY
• Quontic Bank: 4.50% APY

When choosing a high-yield savings account, consider the following:

• Annual percentage yield (APY)
• Deposit requirements
• Fees
• Compounding frequency
• Long-term financial goals

Long-term certificates of deposit

CDs are considered safe investments, but they do carry reinvestment risk. This means that when interest rates fall, investors will earn less when they reinvest the principal and interest in new CDs with lower rates. On the other hand, if rates rise and you've already locked your money into a CD, you won't be able to take advantage of the higher rates.

The financial institution pays you interest at regular intervals, and once the CD matures, you get back your original principal along with any accrued interest. CDs can have terms ranging from a few months to several years. The longer the term, the higher the interest rate tends to be.

When choosing a long-term CD, consider the annual percentage yield (APY), minimum deposit requirements, compounding schedule, term length, early withdrawal penalties, and customer experience. Online banks tend to offer higher interest rates on CDs compared to traditional banks. It's also important to ensure that your CDs are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).

• Quontic Bank: 4.30% – 5.50% APY, $500 minimum deposit, terms from 3 months to 5 years
• Vio Bank: 2.75% – 5.25% APY, $500 minimum deposit, terms from 6 months to 5 years
• America First Credit Union: 4.20% – 5.25% APY, $500 minimum deposit, terms from 3 months to 5 years
• Popular Direct: 4.25% – 5.25% APY, $10,000 minimum deposit, terms from 3 months to 5 years
• Sallie Mae Bank: 4.00% – 5.20% APY, $2,500 minimum deposit, terms from 6 months to 5 years

Dividend stock funds

• Invesco Diversified Dividend Y
• Fidelity High Dividend ETF
• BlackRock Equity Dividend Instl
• Franklin U.S. Low Volatility Hi Div ETF
• Invesco Dividend Income R5
• Vanguard Dividend Appreciation ETF
• Vanguard Dividend Appreciation Index
• Vanguard High Dividend Yield ETF
• WisdomTree U.S. LargeCap Dividend ETF

When choosing a dividend stock fund, it is important to understand which approach the fund takes. Some funds invest in high-dividend stocks, which typically come from more mature businesses that choose to pay out profits rather than reinvest them. Others focus on dividend-growth stocks, which don't usually have robust yields but come from companies that are financially healthy and have raised their dividends over time.

Value stock funds

• Vanguard S&P Mid-Cap 400 Value Idx I
• LSV Small Cap Value Institutional
• Vanguard Small Cap Value Index Admiral
• Vanguard Mid-Cap Value Index Admiral
• American Funds American Mutual (AMRMX)
• Diamond Hill Large Cap (DHLYX)
• Dodge & Cox Stock (DODGX)
• Harbor Mid Cap Value (HAMVX)
• John Hancock Disciplined Value Mid Cap (JVMIX)
• JPMorgan Equity Income (OIEJX)
• LSV Small Cap Value (LSVQX)
• MFS Mid Cap Value (MCVRX)
• Schwab US Dividend Equity ETF (SCHD)
• Vanguard High Dividend Yield Index/ETF (VHYAX, VYM)
• Vanguard Mid-Cap Value Index/ETF (VMVAX, VOE)
• Vanguard Russell 1000 Value Index (VRVIX)
• Vanguard S&P Mid-Cap 400 Value Index (VMFVX)
• Vanguard S&P Small-Cap 600 Value Index (VSMVX)
• Vanguard Small-Cap Value Index/ETF (VSIAX, VBR)
• Vanguard Value Index/ETF (VVIAX, VTV)
• Victory Sycamore Established Value (VEVRX)
• Victory Sycamore Small Company (VSORX)

Small-cap stock funds

• Potential for Growth: Small-cap companies have a higher potential for growth than large-cap companies, offering investors the chance for significant financial returns.
• Lower Share Price: Small-cap stocks often have lower share prices, making the initial investment more accessible. Regulations also prevent mutual funds and hedge funds from pushing up prices.
• Variety of Businesses: Small-cap companies span various industries, and many are well-established with strong track records and solid financials.
• Less Popular: Small-cap companies receive less coverage from financial institutions and analysts, so they may be priced below their actual value, offering a solid return on investment.
• Volatile Prices: Smaller companies are more susceptible to market volatility, leading to sudden and wide price fluctuations.
• High Risk: While small-cap companies offer growth potential, they also have a higher chance of failure. They typically have less access to investment capital and are more sensitive to market shifts.
• Less Available Information: Due to their smaller size, small-cap companies may not have as much publicly available information, requiring investors to conduct thorough research before investing.

When considering small-cap stock funds, it's essential to evaluate the fund's investment strategy, historical performance, fees, and the expertise of the fund managers. Here are some specific examples of small-cap stock funds:

• Vanguard Small-Cap Index Fund (VSMX): This fund tracks the U.S. small-cap market and is offered by Vanguard, a well-known investment firm.
• Fidelity Small Cap Index Fund (FSSNX): Similar to the Vanguard fund, this Fidelity-offered fund also tracks the performance of the U.S. small-cap market.
• T. Rowe Price Small-Cap Stock Fund: This fund seeks long-term capital growth by investing primarily in small-cap stocks.
• DFA US Small Cap Growth Portfolio: This fund seeks long-term capital appreciation by investing in small-cap companies with growth characteristics.
• Eaton Vance Small-Cap Fund (ERSGX): This fund employs a bottom-up stock-picking approach to identify small-cap companies expected to achieve growth that exceeds the average of all publicly traded companies in the U.S. over the long term.

Frequently asked questions