Investments To Make Now: Your Guide To Success

There are many options for investments, each with its own pros and cons, and each requiring varying levels of knowledge. For those looking to invest in the short term, there are several options, including high-yield savings accounts, money market accounts, and government bonds. For those looking to invest in the long term, there are stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, and cryptocurrencies.

When considering what to invest in, it's important to keep in mind your financial goals, risk tolerance, time horizon, knowledge of investing, and how much you can invest.

High-yield savings accounts

Some high-yield savings accounts have no minimum balance requirements, no monthly fees, and no minimum deposit amounts. For example, the American Express High Yield Savings Account has no monthly fee, no minimum deposit, and no minimum balance requirement.

When choosing a high-yield savings account, it's important to consider factors such as interest rates, monthly fees, minimum balance requirements, and APYs. It's also worth looking beyond the larger, well-known banks, as many smaller institutions and online banks offer competitive rates and low deposit requirements.

• SoFi Checking and Savings: 3.80% APY
• Discover Online Savings: 3.75% APY
• American Express High Yield Savings Account: 3.80% APY
• CIT Bank Platinum Savings: 4.35% APY
• Capital One 360 Performance Savings: 3.80% APY
• UFB Portfolio Savings: 4.01% APY

Exchange-traded funds (ETFs)

Here's how you can invest in ETFs:

• Open a brokerage account: You'll need a brokerage account to buy and sell securities like ETFs. Many brokerages have no account minimums, transaction fees, or inactivity fees.
• Find and compare ETFs with screening tools: There are thousands of ETFs listed, so screening tools are critical for finding the right ETFs for your goals. Criteria to consider include administrative expenses or expense ratios, commissions, volume, holdings, performance, and trading prices.
• Place the trade: Navigate to the "trading" section of your brokerage and buy the ETF using its ticker symbol. Specify the number of shares you wish to buy and choose from basic order types like market, limit, stop, or stop-limit orders.
• Sit back and relax: Congratulations, you've bought your first ETF! These funds can help form the basis of a well-diversified portfolio. There's no need to constantly check its performance, but you can access that information through your brokerage or by typing the ticker symbol into a search engine.

ETFs can expose your portfolio to different assets and markets, including:

• Sector ETFs: These focus on specific industries like consumer staples, energy, financials, healthcare, and technology.
• Dividend ETFs: These allow investors to buy stocks that pay dividends.
• Bond ETFs: These provide exposure to a portfolio of bonds, often divided into sub-sectors like long-term or short-term bonds, total bond markets, and municipal bonds.
• Commodity ETFs: These give investors access to specific commodities like agricultural goods, oil, and precious metals.
• Currency ETFs: These ETFs give exposure to specific currencies like the US Dollar, Euro, or Japanese Yen.
• Real estate ETFs (REITs): These focus on holding stocks classified as REITs, which pay out substantial dividends.
• Volatility ETFs: These ETFs allow investors to bet on the volatility of the stock market, often measured by the CBOE Volatility Index (VIX).
• Leveraged ETFs: These ETFs aim to provide gains that are two or three times higher than the daily return on the tracked index.
• Inverse ETFs: These ETFs rise in value when the market declines and inversely track specific indices.

ETFs have several advantages:

• Diversification: ETFs allow investors to diversify across horizontals like industries, reducing the risk of investing in just one industry.
• Transparency: ETFs disclose their holdings each day, allowing investors to closely monitor their investments.
• Tax advantages: ETFs only incur capital gains taxes when you sell the investment, whereas mutual funds may require you to pay capital gains taxes throughout your investment. ETFs also give you control over when to sell, making it easier to avoid higher short-term capital gains tax rates.

However, there are also some disadvantages to consider:

• Potential commissions: While many brokers have dropped ETF commissions, some may still charge fees.
• Liquidity issues: ETFs that aren't frequently traded may be harder to sell.
• Risk of ETF closure: If a fund doesn't bring in enough assets to cover administrative costs, investors will need to sell, potentially at a loss, and reinvest their money.

ETFs are a good choice for beginners as they are relatively inexpensive, available through robo-advisors and traditional brokerages, and tend to be less risky than investing in individual stocks.

Real estate and REITs

REITs are companies that own or finance income-producing real estate across a range of property sectors. They offer investors a way to gain exposure to the real estate market without the need to buy and manage physical properties directly. REITs are required to distribute at least 90% of their taxable income to shareholders as dividends, making them attractive income-generating investments.

Publicly traded REITs are the most accessible way to invest in real estate. They trade on stock market exchanges just like other public companies. Some examples of publicly traded REITs include:

• Prologis, which owns and manages industrial properties such as warehouses and distribution centres.
• Public Storage, which owns more than 3,300 self-storage properties in the US and Europe.
• AvalonBay Communities, one of the largest apartment and multifamily residential property owners in the US, focusing on larger cities and their suburban areas.

In addition to REITs, there are other ways to invest in real estate. One option is to buy a rental property, which can provide a steady income stream through rent collection. This option may not be suitable for everyone, as it requires a significant upfront investment and the willingness to take on the responsibilities of a landlord.

Another way to invest in real estate is through online platforms that allow individuals to invest in a portfolio of properties. These platforms typically pool investors' funds to purchase and manage properties, providing a more passive form of real estate investment.

Overall, real estate and REITs can be excellent additions to an investment portfolio, offering stable returns, income potential, and diversification benefits.

Short-term investment vehicles

High-Yield Savings Accounts

High-yield savings accounts are just as safe and easy to access as your traditional savings account at a big bank, but they offer a much higher return. Your money is protected through FDIC insurance up to $250,000 per depositor per bank, and you can make deposits at any time. While the Federal Reserve removed Regulation D, which limited convenient withdrawals and transfers to no more than six per month, banks generally still enforce this restriction. Some high-yield savings accounts, such as Lending Club LevelUp Savings and UFB Portfolio Savings, also provide you with a free ATM card.

Money Market Accounts

Money Market Accounts, or MMAs, are stable vehicles for your short-term investments because they offer FDIC insurance up to the standard $250,000 per depositor per bank. With MMAs, you can deposit cash at any time, and the same six-per-statement-cycle withdrawal or transfer limit may apply, depending on your bank. MMAs offer variable interest rates and checking account features, such as check-writing privileges, debit cards, ATM access, and out-of-network ATM fee reimbursements. Cash withdrawals from an ATM are typically not part of any imposed limit, so you can always access your cash directly and immediately. Ally Bank and Sallie Mae both offer top-notch money market accounts.

Short-Term Corporate Bond Funds

Corporate bonds are bonds issued by major corporations to fund their investments. They are typically considered safe and pay interest at regular intervals, perhaps quarterly or twice a year. A short-term corporate bond fund is not insured by the government, so it can lose money. However, bonds tend to be quite safe, especially if you're buying a broadly diversified collection of them. A short-term bond fund also provides the least amount of risk exposure to changing interest rates, so rising or falling rates won't affect the price of the fund too much. You can purchase them at virtually any online broker that offers ETF and mutual funds.

No-Penalty Certificates of Deposit (CDs)

A no-penalty CD lets you dodge the typical fee that a bank charges if you cancel your CD before it matures. CDs are time deposits, meaning when you open one, you're agreeing to hold the money in the account for a specified period. In exchange for the security of having your money in its vault, the bank will pay you a higher interest rate. CDs are insured by the FDIC, so you won't lose any money on them. The risks are limited for short-term CDs, but one risk is that you may miss out on a better rate elsewhere while your money is tied up. The lack of a penalty helps mitigate this risk, however. You can find CDs at your bank, and they'll generally offer a higher return than other bank products.

Short-Term U.S. Government Bond Funds

Government bonds are like corporate bonds, except they're issued by the U.S. federal government and its agencies. Government bond funds purchase investments such as T-bills, T-bonds, T-notes, and mortgage-backed securities from federal agencies. Short-term government bonds are good for risk-averse investors who want a very safe investment. Because they're backed by the full faith and credit of the United States, these bonds are considered very safe. U.S. government bonds are the most widely traded assets on the exchanges, so government bond funds are highly liquid and can be bought and sold on any day the market is open. You can purchase them at virtually any online broker that offers ETF and mutual funds.

Stocks

When it comes to stocks, investors want to put their money in companies with strong fundamentals. Here are some options for the best stocks to invest in now:

Alphabet (Google)

Google's parent company, Alphabet, is one of the world's most valuable companies, dominating nearly 90% of the worldwide market share for internet search. While advertising is Alphabet's primary revenue stream, the company also generates income from Google Cloud, hardware devices, and other ventures like Waymo, an autonomous driving technology company. Alphabet delivers consistent revenue growth and high profit margins with minimal debt. However, it faces intense regulatory scrutiny over antitrust issues and data privacy controversies. Alphabet stock trades for a premium when compared with other tech stocks.

Apple

Apple's success and revenue are largely built upon the iPhone, which represented more than half of all net sales in the 12 months ending on September 30, 2024. As a stock, Apple offers financial stability and strong brand recognition. It also pays dividends to investors. On the downside, Apple's high dependence on the iPhone makes it vulnerable to market saturation and declining sales. Additionally, the stock has a high valuation, and missing growth expectations could impact its performance.

Advanced Micro Devices (AMD)

AMD is a prominent player in the semiconductor industry, with a focus on artificial intelligence. The company has gained market share in the CPU, GPU, and data processing spaces. AMD has delivered solid revenue growth, with an 18% year-over-year increase in revenue for the quarter ending on September 28, 2024. However, it faces competition from Nvidia in the AI GPU market and relies on Taiwan Semiconductor Manufacturing Co. (TSMC) for chip production. AMD stock has a high price-to-earnings ratio, which may spark valuation concerns.

Becton, Dickinson (BDX)

Becton, Dickinson (BDX) specialises in single-use surgical products that are regularly replaced, resulting in stable and recurring revenue. Morningstar analyst Alex Morozov highlights that 85% of the company's revenue is recurring. Becton's stock trades at a discount compared to its historic price-earnings ratio and peers. Analysts expect a 9.2% increase in 2025 earnings. The company also offers a dividend yield of 1.9%.

Goldman Sachs

Goldman Sachs is a leading investment bank that has performed well in recent years. The company's wealth management business pulled in record fees in 2024, with assets rising to a new high of $3 trillion. Goldman Sachs stock has seen a 69% increase over the past 12 months. It trades at 14 times 2025 expected earnings, in line with its five-year average. Analysts anticipate annual earnings growth of 15% in 2025, and the stock provides a dividend yield of 1.9%.

Other Mentions

• Fiserv (FI): Provides information management and e-commerce systems for the financial services industry.
• Lam Research (LRCX): Manufactures semiconductor equipment and is well-positioned to benefit from the growing demand for AI and high-performance computing.
• Spotify Technology (SPOT): A leading music streaming service that is spinning into profitability in 2025.
• Vertiv Holdings (VRT): Specialises in digital infrastructure and components for cooling systems in data centres and AI computers.

Frequently asked questions