13 Best Long Term Investment Strategies & Products for 2022
Updated: May 29
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.
Real property can also provide good returns over time as a business venture. It's a very good thing for people who want to own property for a living and get rental assistance, whether for a 20-30 - 30 year property.
If you buy your rental property outright you can make great profits for your retirement. Rathbun explains that some people are not willing to become a landlord, and he suggests a property-related REIT. REIT lets investors place real estate bets without managing any particular property individually.
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.
Although it's an official retirement plan, it's a great investment option that can be made for your future. IRAs allow you to invest in a savings plan based on aftertax money and this helps the investment become tax deductible. Then you could withdraw them without paying taxes. Roth IRAs have a number of advantages, including tax and legal advantages, and can offer diversified investment strategies without losing any money. A Roth IRA can be opened through a brokerage and you have the ability to invest in any asset you want.
Bond fund consists of many bonds by various issuances. They are usually organized by bond types within the fund and duration of issuance. Bond funds offer a variety of options suited to your individual requirements. Bonds make a low-risk investment, especially those that belong to funds. The fund owns several bond types and the holdings are also diversified. If one Bond defaults, it will affect the rest of the portfolios. Bond markets fluctuate, but bonds remain stable.
High yield savings accounts
Opening an attractive savings account is another excellent option to consider. High yield savings accounts offer more interest than conventional savings accounts. An investment option may be the best option to invest for the most money you want to get.
Dividend stocks are a simple investment in stocks delivering a certain amount of dividend. The difference between growth stocks and equities is that the stocks have not gained as fast. Instead, investors receive periodic dividend payments. In the majority of circumstances, a dividend is found in mature enterprises with little financial needs. Unlike growth stocks, dividend stocks tend to climb or fall significantly. Dividend stocks have a huge advantage because they pay dividends year after year. So you should have at least an increase in your yearly wages.
Although financial analysts do not agree about whether cryptocurrency should be part of long-term investment portfolios, others believe crypto is worth considering. Financial adviser Daren Blonski from Sonoma Wealth Advisors is an example, but he doesn't want to bet on digital assets. A small investment in bitcoin could be a great way to grow a small business’ cash in a short amount of time, he explains. Alternatively, you may want to invest in investment trusts such as the Grayscale Bitcoin Trust (GBTC), whose investment vehicles allow you to get exposure to bitcoin via traditional means.
Growth stocks are possibly one of the most favored Investing strategies. The firm promises to grow with a strong return. The growth stocks usually represent companies that make technology investments and that's rarely happening. Their earnings are generally injected into the company therefore there are no dividend payments if any. Growth stocks pose a risk since many investment companies are paid relatively high prices when it comes to profits. In that way stock values lose quickly during recessions. Growth stocks however remain a great long-term investment choice. If you want a specific growth stock you need to analyze it thoroughly.