7 Best Long-Term Investment Strategies & Products for 2021
Updated: May 17
Long-term investments create wealth. Essentially you invest money so that you'll have it in retirement or at another time in the long-term future. To build wealth, you'll need to take some risks. The key is to choose investments and management strategies that mitigate risk and will grow your money over the long term.
Here are seven investments with the best potential for long-term appreciation.
One of the best ways to build wealth is through investing in real estate. If you have the capital, desire, and skills to be a landlord, you can invest in commercial real estate, such as office buildings and apartments. The key is to find opportunities that allow you to invest using the bank's money and little of your own.
Many people lack the capital to create a diversified portfolio or the inclination to become landlords. They can invest in real estate through real estate investment trusts, or REITs. They can invest a relatively small amount of money in a REIT and participate in the ownership and profits of several types of real estate.
Real estate crowdfunding provides another way for smaller players to invest. Through platforms such as Fundrise, you can invest as little as $500 and choose the investment.
Stocks represent ownership in profit-generating companies. Many pay a dividend and also can appreciate or depreciate depending upon the market. Stocks are usually of two types: growth stocks, which invest dividends into long-term growth, and dividend paying stocks, which pay yields immediately.
Long-term bonds are interest-bearing government, corporate, municipal, or international securities with terms greater than 10 years. The attraction is the interest rate, which is typically higher than that of shorter-term investment options. If interest rates paid by other investments rise above what your bond is paying, the bond's value will drop. If interest rates of other investments fall, your bond will be worth more. So, the key to investing in long-term bonds is to do so when the interest rates on other investments remain low.
Mutual funds allow you to diversify because they function as portfolios of long-term stocks and bonds. They are particularly favored by those who want to invest in the stock market but don't know much about picking stocks or by modest investors who want to diversify. Diversification lessens the risk of investing because if one stock in the fund falls in value, another one may increase. Many contain both stocks and bonds.
Mutual funds have different goals, and the key is to choose a fund that best matches your own goal. For example, some are growth funds, while others are based on finding the stocks in a given industry that offer the best value.
Exchange Traded Funds (EFTs)
Exchange traded funds are similar to mutual funds, but instead of being professionally managed, they invest in indexes such as the S&P 500. They typically charge fewer fees than mutual funds; however, their goal is not to exceed an index as a mutual fund tries to do. Instead, the goal is to perform just as well as the index. They also can be bought on a per-share basis, so they require very little capital to invest.
Tax-Sheltered Retirement Plans
These qualified plans may allow you to deduct the money you invest or to defer taxes on your earnings, or both. They include traditional IRAs, Roth IRAs, 401ks, 403bs, SEP IRAs, Simple IRAs, and TSA’s. These are not considered investments in the true sense of the word because each of these plans allows you to choose investments within it. For example, a popular 401k option is a target fund based upon the year you plan to retire. As you get closer to that time, the fund shifts to more conservative investments.
Annuities are contracts between you and an insurance company. You pay a lump sum upfront or a certain amount over a period of time; then, they pay you an income over your lifetime or a set time period. Fixed income annuities and deferred income annuities might be good investments if you lack a pension plan and are looking for guaranteed income for life.