Invest Now: Where To Focus

There are many options to consider when deciding what to invest in, and the best choice depends on your risk tolerance, the amount of money you have to invest, and your time horizon. Here are some of the most common investment vehicles:

- Stocks: Stocks have consistently proven to be a great way to build wealth over the long term, with U.S. stocks delivering better returns than most other investment types over the past four decades.

- Exchange-Traded Funds (ETFs): ETFs are similar to mutual funds but trade on major stock exchanges and offer more flexibility in terms of buying and selling.

- Mutual Funds: Mutual funds pool investors' money to purchase a portfolio of stocks or other investments. They are less liquid than ETFs but provide more diversification.

- Bonds: Bonds are loans to a company or government and are considered less risky than stocks, making them suitable for investors who want to preserve their capital.

- High-Yield Savings Accounts: Some online banks offer competitive interest rates on savings accounts, making them a viable investment option.

- Certificates of Deposit (CDs): CDs offer guaranteed yields for a fixed period, allowing you to lock in a specific interest rate.

- Real Estate: Investing in real estate can be a wonderful way to build wealth, and there are various ways to do so, such as buying rental properties or investing in real estate investment trusts (REITs).

- Cryptocurrencies: Cryptocurrencies like Bitcoin and Ethereum are a relatively new form of investment that can be considered for those with knowledge in this area.

High-yield savings accounts

UFB Direct

UFB Direct is an online bank and a division of Axos Bank. It offers a high-yield savings account with a competitive APY of 5.25%. There is no minimum deposit requirement and zero monthly fees, making it a great option for anyone looking to boost their savings. UFB Direct also stands out for its massive ATM network of over 91,000 locations and its highly-rated mobile app.

Credit Karma Money Save

Credit Karma Money Save is a financial technology company owned by Intuit. It offers a high-yield savings account with an APY of 5.10%. There is no minimum deposit requirement, and you only need a penny in your account to start earning interest. Credit Karma Money Save also provides FDIC insurance coverage of up to $5 million, which is much higher than the standard $250,000 coverage.

Varo Bank

Varo Bank is an online-only bank that offers a high-yield savings account with an APY of 5.00% on balances up to $5,000. To qualify for this APY, you need to meet certain requirements, such as receiving qualifying direct deposits of $1,000 or more in your account. Varo also offers helpful savings tools, such as a round-up feature that rounds up your spending on a transaction and puts the extra money into your savings account.

My Banking Direct

My Banking Direct is an online-only bank and a division of Flagstar Bank. It offers a high-yield savings account with an impressive APY of 5.55%. There is no monthly fee, and you only need $1 in your account to start earning interest. My Banking Direct also offers mobile banking, automatic deposits, and unlimited transactions, making it a great option for both short-term and long-term savings goals.

Cloudbank 24/7

Cloudbank 24/7 is a digital bank backed by Third Coast Bank. It offers a high-yield savings account with an APY of 5.22% and a minimum opening deposit of just $1. Interest is compounded daily, and your deposits are FDIC-insured through Third Coast Bank. Cloudbank 24/7 also offers a mobile app that allows you to view your account balances, transfer money, and utilize mobile check deposit.

Exchange-traded funds (ETFs)

ETFs are a good option for investors who don't have enough money to meet the minimum investment requirements for a mutual fund, as the share price of an ETF may be lower. They also offer low expense ratios and fewer broker commissions compared to buying the stocks individually.

There are various types of ETFs available, including:

• Passive ETFs: These aim to replicate the performance of a broader index, such as the S&P 500, or a more specific sector or trend.
• Actively managed ETFs: These do not target an index of securities but have portfolio managers making decisions about which securities to include. While these can be more expensive, they can also provide benefits over passive ETFs.
• Bond ETFs: These provide regular income to investors, with distributions depending on the performance of underlying bonds, which may include government, corporate, and municipal bonds.
• Stock ETFs: These are baskets of stocks that track a single industry or sector, providing diversified exposure to high performers and new entrants in that sector.
• Industry or sector ETFs: These focus on specific sectors or industries, such as energy or financial services.
• Commodity ETFs: These invest in commodities like gold, oil, or natural gas and can help diversify a portfolio.
• Currency ETFs: These track the performance of currency pairs, allowing investors to speculate on currency prices based on economic and political developments.
• Bitcoin ETFs: These expose investors to bitcoin's price movements by holding bitcoins as the underlying asset.
• Inverse ETFs: These allow investors to profit from stock declines by shorting stocks.
• Leveraged ETFs: These seek to return multiples of the return of the underlying investments, using debt and derivatives to leverage returns.

When investing in ETFs, it is important to consider the advantages and disadvantages. Advantages include access to a diverse range of stocks across industries, low expense ratios, and risk management through diversification. However, drawbacks include higher fees for actively managed ETFs, limited diversification for single-industry-focused ETFs, and potential liquidity issues.

ETFs can be traded through online brokers, traditional broker-dealers, or robo-advisors. Many platforms offer commission-free trading, and investors can use ETF screening tools to narrow down their options based on criteria such as trading volume, expense ratio, and past performance.

Overall, ETFs are a flexible and cost-effective way to gain exposure to a diverse range of securities, making them a good option for investors with a long-term horizon.

Dividend stocks

When considering investing in dividend stocks, it is important to evaluate the dividend yield, which is the dividend per share expressed as a percentage of the company's share price. A high dividend yield can sometimes be a red flag, indicating that the payout may be unsustainable or that the company is in financial trouble. It is also important to consider the payout ratio, which is the percentage of the company's income that is being paid out as dividends. A payout ratio above 80% may indicate that the company is putting too large a percentage of its income into dividend payments.

There are two main ways to invest in dividend stocks: through funds such as index funds or exchange-traded funds (ETFs) that hold dividend stocks, or by purchasing individual dividend stocks. Funds offer instant diversification, while investing in individual dividend stocks allows investors to build a custom portfolio that may offer a higher yield. Additionally, expenses can be lower with individual dividend stocks since ETFs and index funds charge an annual fee.

When deciding whether to invest in dividend stocks, it is important to consider your investment goals and risk tolerance. Dividend stocks may be a good choice for investors seeking regular income and lower-risk investments. However, it is important to carefully evaluate the dividend yield and payout ratio to ensure that the dividend is sustainable.

Real estate

You can invest in individual properties, but that does require both a large amount of capital and hands-on management. A much simpler way, and one that fits better within a portfolio, is to invest through real estate crowdfunding platforms.

“Historically, real estate has always been the best-performing asset class,” notes Patrick Donoghue, Vice President, Market Risk at Groundfloor Finance. “One of the best ways to invest is through private capital real estate deals. We’ve seen consistent 10% annualized returns across our portfolio. With fractional real estate investing, you can invest $10,000 at $100 each into 100 different projects and be well-diversified.”

A similar way is to invest in real estate investment trusts or REITs. These are funds that invest primarily in commercial real estate. That can include office buildings, retail space, large apartment complexes, and similar properties. For 2023, REITs provided a return of 11.7%. While that's well below the performance of the S&P 500 for the year, it's sufficient to justify REITs as a worthy portfolio addition for diversification purposes.

REITs trade like stocks and generally offer high dividend yields, as well as the potential for capital appreciation. It’s also an opportunity to invest in a portfolio of properties, which offers greater diversification than purchasing a single piece of real estate.

One of the best options in today's market is RealtyMogul. RealtyMogul is a crowdfunding platform for buying and selling commercial real estate. The platform is good for accredited and non-accredited investors alike.

Tips for investing in real estate in 2024

• Rental demand is falling, so investors should be cautious when calculating the numbers on an investment property.
• Focus on cash flow and risk mitigation.
• Fix-and-flip investors will face a challenging year, with weaker demand, a lack of supply, and prices that have plateaued or declined.
• There will be less competition from prospective homebuyers and iBuyers.

Cryptocurrencies

Bitcoin (BTC)

Bitcoin is the most well-known and popular cryptocurrency. It has a limited supply and constrained supply growth, making it a valuable investment option. The price of bitcoin has surged by 202% in the past year, and it is expected to continue rising due to increasing demand and constrained supply growth.

Ethereum (ETH)

Ethereum has maintained its status as a profitable digital coin for investors. Analysts predict that it will see an uptrend soon, and its price is expected to increase. The projected launch of ETH2.0 and the increasing number of miners accumulating this coin are likely to contribute to its potential growth.

Ripple (XRP)

Ripple is a payment alternative created for banks and other large financial institutions. It has gained widespread adoption, with several banking institutions choosing to utilise its innovative blockchain technology. As cryptocurrencies gain more mainstream traction, Ripple is adding more banks and customers to its network, making it a good investment option.

Tron (TRX)

Tron is a decentralised platform launched in 2017 that has attracted many cryptocurrency investors. It enables fast and secured transactions and aims to promote and support the entertainment industry by allowing users to upload and download media without the intervention of third parties. Tron has been attracting more and more investors, and some experts predict that its coin could hit $40 by the end of the year.

Zcash (ZEC)

Zcash is a newer cryptocurrency in the market, but it has already made significant strides. It offers a certain level of anonymity to its users and provides detailed reports of transactions. The CEO, Zooko Wilcox-O'Hearn, has forward-thinking growth and expansion strategies, making Zcash a promising investment opportunity.

Binance Coin (BNB)

Binance is the world's largest cryptocurrency exchange, and it also has its own coin, BNB. BNB has high liquidity and is one of the superior assets in cryptocurrency trading. It has seen significant adoption and steady growth, even during times of market turmoil, making it a good long-term investment prospect.

Frequently asked questions