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The Best Investments To Make In 2022

by Amarachukwu
The Best Investments To Make In 2022

Every new year, we make new year resolutions and a lot is centered on making more money than we made in the previous year. While this article is not to police you on which resolution makes it to at least the second quarter of the year, it is to direct you to those avenues with a more possibility of making a high ROI.

While it is good to invest, it is better to get the right information before going ahead with your investment plan. When it comes to investments, you don’t want to test the waters with both feet. Especially when your knowledge of the said investment is sketchy.

There is also nothing like being too careful as you may be making a life-changing decision. This may, therefore, translate to doom if done ignorantly.

The Best Investments To Make In 2022

Most times, investors want to put their money in a venture where they get the highest return possible in the shortest period with little or no risk involved. Unfortunately, low risks and high profits don’t usually align in the same sentence. In most investments, the higher the risks involved, the higher the profits.

As you look into investing your hard-earned cash into an investment either to earn actively or passively, do not get carried away with the possible returns that you stand to bag. Consider the risks involved too. Are they risks that you are capable and willing to take? This is as important as the quest for profits when you invest.

Over time, professionals have agreed that the best strategy for investment is diversity. As an investor, you cannot afford to put all your eggs in one basket. This means it is not advisable to put all your money on one investment stream. Diversify. This does not only help you to earn from different angles of the economy, but it also brushes up your knowledge of different sectors. Also, it serves as a security move. That way, when one investment fails, you have one or more to bounce back to. Thereby, lowering your risk of total and irrecoverable loss.

As you invest, do well not to be emotionally driven. Also, do not go into an investment just because everyone else does. Ensure you carry out due diligence and have an understanding of the said investment.

 

Why you should invest?

Do you want to grow your wealth? Invest! It’s as simple as that. Yes, you invest to solve an identified problem in society, but there’s no denying the fact that as an investor if it’s not profitable or has the tendency to bring in some profits, you won’t consider putting your funds into such a venture.

You can invest to earn income actively or passively, fund your retirement or get you out of a financial tight corner. It helps you to meet your financial goals- both short and long-term alike. With time, investing continually increases your purchasing power.

It is also important to note that there is no better way to make money than to make the one you already have work for you. It works round the clock; unlike humans that take breaks and eventually retire.

Best investment options

1.       High-yield savings account

A high-yield savings account is one where you earn a particular percentage as interest on your cash balance. The same way an ordinary savings account attracts interest on the cash balance in the account. The interesting thing about the high-yield savings account is, the longer you leave the money in the account, the more interest you stand to gain.

The risks involved in a high yield savings account are usually minimal, even though the interest rate may be different from other investment options. But you can rest assured of the safety of your funds since this option is provided by FDIC-insured banks.

However, you must note that even though you can still have access to your money, the investment terms may limit how often you can withdraw so it doesn’t affect your interest. Thereby, affecting your liquidity within the said period especially when you need cash urgently and have no alternative to the same.

2.       Certificates of deposit

Certificates of deposit also called CD is another investment option in the bank and generate higher interests than a savings account.

It is also referred to as a time deposit.

The term of a CD requires that your fund is ‘tied’ in the bank for an agreed period. This period may range from a few weeks to months and sometimes, years. Within such a period, you cannot withdraw from the account. If you must, penalties are attached.

The interest on a time deposit is paid at intervals into your account and at the end of the tenure, you now have access to your capital and interest combined. At that point, you can then decide what to do with the funds- either to withdraw, take profits and reinvest the capital, or even reinvest both the capital and interest. All these options and more are yours to take.

This investment option is usually good for retirees who may not need liquid cash often and need to keep them somewhere safe and gain interest as well. It is also a great option if you are looking at keeping money towards a particular time or project.

You must also note that a CD, unlike your savings account is capable of highly affecting your liquidity since you cannot withdraw until the end of the agreed term which usually lasts months.

3.       Government bond funds

These are mutual funds or exchange-traded funds (ETFs). This investment focuses on debt securities that the American government or its authorized agencies issue.

The funds are invested on instruments like Treasury bills (T-bills), Treasury notes (T-notes), Treasury bonds (T-bonds), and other mortgage-backed securities. They are issued by enterprises that are government-sponsored and are considered more by low-risk investors.

Investing in government bond funds for the short-term are usually characterized by low risks unlike doing the same for the long term. The latter may be affected by interest-rate fluctuations.

The involvement of the US government in this investment gave it some level of guarantee and makes it easy for investors to sleep at night with their two eyes shut.

Although, this option is still prone to fluctuations in interest rates and inflation. A rise in the inflation rate may drop investors purchasing power. Similarly, a rise in the interest rate may lead to a drop in the prices of existing bonds. And when the interest rate drops existing bond prices increases.

4.       Short-term cooperate bond funds

Sometimes, companies can decide to issue bonds to interested investors and raise funds in the process. A short-term cooperate bond fund usually average a year to five years and is hardly affected by fluctuations of interest rate as against long-term bonds.

This investment option is a great one for retirees or those interested in low-risk investments and it generates a higher ROI than the government bond funds. It also improves cash flow.

Although the short-term cooperate bond fund rewards investors with higher profits than the government bond fund, it is not FDIC-insured. So, with the greater reward comes great risk.

You have every business day to buy or sell your fund shares. A capital loss is also possible in this form of investment.

5.       Municipal bond funds

The municipal bond fund invests in munis at the state and local government levels. Federal income taxes are not deducted from this bond fund and in some cases, state and local taxes may be exempted too. This unique feature makes this investment option to be attractive to investors in states that are considered high-taxed.

You can invest in a municipal bond fund as an individual investor, through an exchange-traded fund or a mutual fund. While it is okay to talk to your financial advisor before jumping on the investment train, it is usually advisable to stick to such investment opportunities in your location so you can enjoy additional tax advantages.

Munis are generally safe to invest in since states and cities rarely go bankrupt, but there is a possibility of that happening. They are also callable, which means that the issuer can refund the investment before its due date.

The municipal bond fund is also available for buy and sells on every business day.

6.       S&P 500 index funds

The S&P index fund is a sure way to earn more profits than what traditional banks offer. Although, it is more volatile.

The fund comprises a lot of the largest companies in the US, which are also regarded as part of the global successful companies. They number about 500 including Amazon and Berkshire.

The S&P 500 index fund allows you as an investor to own a part of the member companies. It is a great investment option for new investors and provides them with diversified exposure to the American stock market.

This investment option is a great one for investors that are looking at investing their funds for a minimum of three to five years. Since it is characterized by highly diversified top companies, it is regarded as a less risky approach to investing in stocks.

It also encourages liquidity as investors can decide to buy or sell their stocks on any market day.

7.       Dividend stock funds

Investing in stocks that pay dividends is another great way to put your money to work for you.

A dividend is a portion of a company’s profit that is given to shareholders/investors at intervals- usually quarterly. When you invest in a dividend stock fund in a long term, you stand to gain when the market appreciates, and get some cash profits in the short term.

This investment option is great if you are looking at the possibility of investing long-term and passively earning something in the short term.

As interesting as it sounds, you may want to do your research on the history of the company whose stock you want to buy. A question like ‘how solid is the company’s history of dividend increase?’ is a solid one to ask before you jump on the train as an investor.

If your findings are not convincing enough, that may be a sign for you to have a rethink. Although, well-established companies too are not totally immune from experiencing a financial crisis. Therefore, a good reputation does not automatically translate to a go-ahead to invest.

You are also at liberty to buy and sell your fund on any market day. You also stand to get your quarterly pays in cash. However, if you really want to get the best out of your fund, you should consider investing long-term. You may also consider reinvesting your dividends to increase your chances of gaining more.

8.       Real estate

The real estate investment option is as old as mankind. The shelter is a necessity for humans and it will always be needed. It is also a sector that can be highly affected by the economic trends in society. When the economy is harsh, you may see a lot of tenants defaulting in paying their rents.

To invest in real estate, you will have to buy a property, renovate and make it rentable and be ready to deal with tenants. They can call you by 3 am over a broken pipe!

Landed properties are also known to appreciate in value over time. So, the profits may not come immediately. This investment option requires that you hold onto the property for a long period to get the best out of it.

It is also great if you are looking at managing your own property and earning a regular income. You may also do your findings before buying a property. This will guide you from buying overpriced property and having to deal with meager offers from tenants for example.

9.       Cryptocurrencies

Currently, no investment list is complete without cryptocurrency. It is also called a digital currency or asset.

In the past few years, cryptocurrencies have become more popular across the world with Bitcoin, the alpha currency hitting tens of thousands of dollars.

Although, these assets are highly volatile and are not FDIC-insured. Its value is determined by how much traders are willing to pay for it.

Cryptocurrencies are not the best investment option for people who are not capable of taking risks. It involves a high level of risk. Your whole investment can go down to ground zero in no time, just as you stand a chance of hitting a record-breaking financial height with the same investment. Can be highly risky and highly rewarding.

There is also the risk of your portfolio being attacked by hackers since everything is done online. It is also highly liquid as you can buy and sell digital assets at any time of the day.

 

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The Best Investments To Make In 2022 | blogs | ... November 27, 2021 - 6:26 pm

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