Investment Opportunities: Where To Go And Grow Your Money

There are many different avenues to explore when it comes to investing your money. The best investment for you depends on your risk tolerance, timeline, and other factors.

Some of the most common types of investments include stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, and cryptocurrencies. Each of these investment types carries different levels of risk and potential rewards.

Before investing, it is important to evaluate your financial situation, understand the vehicles you are putting your money into, establish a personal spending plan, and determine your risk tolerance. You can also choose to consult a financial advisor for guidance.

Additionally, consider the tax implications of your investments and the different types of investment accounts available, such as pre-tax contribution accounts, taxable brokerage accounts, and retirement accounts like Individual Retirement Accounts (IRAs).

By diversifying your investments and choosing the right investment vehicles for your goals, you can make informed decisions to help you achieve your financial objectives.

High-yield savings accounts

With a high-yield savings account, your balance can grow faster over time without any additional effort on your part. For example, with a 4% annual percentage yield (APY), a savings balance of $10,000 would earn you over $400 after a year. This is a significant increase compared to an account with a 0.40% APY, which would only earn you around $40 in the same period.

When choosing a high-yield savings account, look for accounts with high-interest rates and low service charges. Some institutions don't charge monthly fees, while others will waive them if you meet a balance minimum. You can often open these accounts online, without having to leave your home. However, keep in mind that some high-yield savings accounts require a higher minimum opening balance compared to regular savings accounts.

• SoFi Checking and Savings: 3.80% APY
• American Express High Yield Savings Account: 3.80% APY
• CIT Bank Platinum Savings: 4.30% APY
• Openbank High Yield Savings: 4.75% APY
• Barclays Tiered Savings Account: 4.25% APY
• Capital One 360 Performance Savings: 3.70% APY
• Axos ONE Savings: 4.86% APY
• Forbright Bank Growth Savings: 4.25% APY
• UFB Portfolio Savings: 4.01% APY
• Discover Online Savings: 3.75% APY
• Marcus by Goldman Sachs Online Savings Account: 3.90% APY

Certificates of deposit

Here's how CDs work:

• Interest Rate: Most CD interest rates are fixed, but there are also variable-rate CDs that could earn a higher return if interest rates rise. With a fixed-rate CD, you know exactly how much you'll earn by the end of the term, but you could lose out if interest rates rise after you're locked in.
• Term: This is the length of time you agree to leave your funds deposited without making any withdrawals. Terms can vary from 3 months to even 10 years. The term ends on the maturity date, when you can withdraw your funds without penalty.
• Principal: This is the amount you agree to deposit when you open the CD. With the exception of some specialty CDs, you generally cannot add more funds during the term.
• Financial Institution: You can open a CD at banks, credit unions, and brokerages. The specific terms, such as early withdrawal penalties, may vary depending on the institution.

CDs typically offer higher interest rates than savings and money market accounts. For example, the best CD rates can be three to four times higher than the national average rate for savings accounts. However, CDs also come with less withdrawal flexibility. If you withdraw your funds early, you will usually be charged a penalty.

CDs are a good option if you have cash that you don't need immediate access to but will want within a few years. They are also a good choice if you want to invest some of your savings more conservatively, as they offer lower risk and volatility than stocks and bonds.

One downside of CDs is that your money is locked into the investment, which can be a benefit for savers who want to avoid the temptation of spending their savings. However, the fixed term and penalty for early withdrawal may not be ideal for those who need more flexibility with their funds.

Overall, CDs can be a great option for those who want a guaranteed, predictable rate of return with less risk compared to volatile stocks and bonds. They are also federally insured, with up to $250,000 of your funds protected by the Federal Deposit Insurance Corp. (FDIC) for banks and the National Credit Union Administration (NCUA) for credit unions.

Government bonds

In the US, government bonds are offered by the Department of the Treasury and can be purchased directly at auction or in the secondary market. Auctioned bonds are only available to certain registered participants, often large banks, while the secondary market is available to individual investors.

There are several types of government bonds, including:

• Municipal bonds: Issued by local governments to fund infrastructure, libraries, or parks. They often carry tax advantages and exemptions for investors.
• US savings bonds: Offered by the US Treasury, these include series EE and series I savings bonds, which are sold at face value and have a fixed rate of interest.
• Treasury bills (T-bills): Short-term securities with maturities ranging from four weeks to 52 weeks. They are sold at a discount or face value and pay investors the face value upon maturity.
• Treasury notes (T-notes): Intermediate-term bonds with maturities of two, three, five, or ten years, providing fixed coupon returns.
• Treasury bonds (T-bonds): Long-term bonds with maturities between 20 and 30 years. They provide semi-annual interest or coupon payments and have a minimum investment of $100.
• Treasury inflation-protected securities (TIPS): Indexed to inflation, TIPS protect investors from rising prices. The par value increases with inflation and decreases with deflation, following the Consumer Price Index (CPI).

Corporate bonds

When you buy a corporate bond, you lend money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal and, in most cases, to return the principal when the bond comes due, or matures. The company pays the investor a rate of interest over a period of time and repays the principal at the maturity date established at the time of the bond's issue.

When investing in corporate bonds, investors should remember that multiple risk factors can impact short- and long-term returns. Understanding these risks is an important first step towards managing them. Credit and default risk, market risk, event risk, call risk, make-whole calls, step-up coupon, sector risk, interest rate risk, inflation risk, and foreign risk are some of the risks associated with corporate bonds.

Money market funds

When choosing a money market fund, investors should consider the yield, expense ratio, type of fund, and any additional fees. Money market funds are offered by banks, brokerage firms, and mutual fund companies.

Frequently asked questions