11 Best Investments to Increase Your Wealth [2024] (2024)

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Investing is a long-term strategy that can help you secure additional income and create a financially stable future. The best investments depend on your risk tolerance and capacity and allow you to benefit from the power of compound interest, dividends, or value appreciation.

When you choose quality investments, the value grows over time, but some investments are riskier than others. Here, you’ll learn about the best investments, how they make money, and their risk levels to decide which ones may be right for you.

Key takeaways:

• Investing is a long-term strategy that allows you to build wealth with increasing asset value and compound growth.
• Government bonds, index funds, and high-yield savings accounts are the best investments for low-risk investors looking for moderate returns.
• Individual stocks, real estate, and cryptocurrencies are the best investments for high-risk investors who want high returns.

1. High-Yield Savings Accounts

High-yield savings accounts (HYSAs) are similar to regular savings accounts, but they offer higher interest rates. For example, the average interest rate for regular savings accounts is only 0.58%, while a HYSA may have an interest rate of 5%—10 times the average savings account.

These accounts also benefit from compound interest, which maximizes those higher rates. The credit bureau Experian® explains the concept of compound interest as “…when interest compounds, interest accumulates on the previously accrued interest and the principal. For savers, that means you can earn interest on your interest.”

You can sign up for a high-yield savings account through many banks and credit unions, and some accounts can earn you anywhere around 5% or more annually.

If you have or plan on making an emergency fund, investing expert Javier Simon recommends using one of these accounts. “Anyone looking to open a rainy day or emergency fund that provides a higher-than-average interest rate and high liquidity should consider a high-yield savings account,” writes Simon. You’re saving anyway, so why not make money from storing your funds?

Best investment for: People with lower risk tolerance and strong saving habits. This is one of the safest investments with high returns because many banks are FDIC-insured, so even if the economy has a downturn, your money is backed by the government.

Risk level: Very low

How to invest: Banks, credit unions, and online banks

Potential returns: Moderate

2. Long-Term Certificates of Deposit (CDs)

When looking for where to invest money, many people turn to certificates of deposit, which are also known as CDs. Like HYSAs, CDs are another type of account. CDs work by allowing you to deposit your money with the caveat that you don’t withdraw the money for a certain amount of time. Once that time frame expires, you’ll receive your money back as well as the interest.

There are both short- and long-term CDs, and long-term CDs allow you to benefit from compound interest more because it has more time.

Best investment for: People willing to store their money for one, three, or five years, which are the average predetermined time frames. Just remember that there’s a fee for withdrawing your money early.

Risk level: Very low

How to invest: Banks and credit unions

Potential returns: Moderate returns that sometimes exceed those of high-yield savings accounts

3. Government Bonds

Government bonds are a way for you to loan the government money. Similar to how a bank makes money when you pay interest on a loan, a government bond pays you interest for these bonds. Like CDs, these bonds are for a specified period, but they provide regular payments. People sometimes use bonds as one of the best passive income investments due to these payments.

One caveat to note is the return on government bonds varies depending on how the economy is doing.

Best investment for: Skeptical investors with a low-risk tolerance. Unless the government fails, there’s not much that will prevent you from getting your return on this investment. Unlike other investments, government bonds can last for up to 30 years.

Risk level: Very low

How to invest: The United States Treasury or through a stock broker

Potential returns: Low

4. Corporate Bonds

Corporate bonds are an investment similar to government bonds, but you’re providing that loan to a company. Corporate bonds help companies that need money to invest in new products and expand their business.

These bonds can have a higher rate of return than government bonds, but they’re higher risk. You may not get your money back if the company goes out of business.

Best investment for: Individuals with a higher risk tolerance who are looking for higher returns. These bonds pay out regularly, and they’re a safer investment when buying bonds from large, stable companies that have been around for a while.

Risk level: Moderate to high

How to invest: Stock brokerages

Potential returns: High

5. Real Estate Investment Trusts (REITs)

One of the investment ideas many people turn to is real estate because it can provide extremely high returns when the housing market is good. The downside is that when the housing market has a downturn, as we saw in 2008, people experience big losses.

Rather than investing in real estate, you can invest in real estate stocks, which are called real estate investment trusts (REITs). These stocks are for companies that own properties like malls, office buildings, and other forms of real estate that generate revenue. These can be slightly less risky but still have some risk due to the nature of real estate.

Some REIT sectors are riskier than others because they don’t only invest in the housing market. Some of the riskier sectors of REITs include:

• Hospitality: Hotels, resorts, and convention centers
• Retail: Shopping malls and strip malls
• Healthcare: Hospitals, senior living, and medical offices
• Specialized real estate: Data centers, prisons, and timberlands

You can research different REITs if you’re looking for some with lower risk. Residential housing is lower risk than the high-risk sectors, and you may want to consider REITs that have industrial and office real estate as well.

Best investment for: Those who are looking for high returns or have a diversified portfolio already and can weather some higher-risk investments.

Risk level: High

How to invest: Mortgage broker for real estate and stock brokerages for REITs

Potential returns: High

6. Individual Stocks

Individual stocks are available to everyone, and when the average person buys these types of stocks, they’re known as “retail investors.” You may have heard of retail investors investing in individual stocks during the GameStop stock hype of 2021, which also showed how risky individual stocks can be.

Individual stocks come with a high risk and high reward. Basically, you’re buying a portion, or share, of a single company. Numerous factors dictate the price of a stock, including the company’s profits or losses and speculation about its future.

Since a single stock can have the potential for large returns and losses, a quality investment decision requires researching the company and its industry. For example, investing in Amazon (AMZN) in 2018 and selling in 2021 would have over a 100% return, but buying in 2021 and selling in 2022 would have a 50% loss.

Best investment for: People who are risk-tolerant and willing to research investments.

Risk level: High

How to invest: Stock brokerage

Potential returns: Low to high

7. Index Funds

One of the best ways to reduce risk is by diversifying your portfolio, and that’s why this is one of the best investments. Index funds are a type of stock that allow you to invest in multiple companies rather than just one. When purchasing an index fund, there are often low fees and steady returns.

The famous investor and founder of The Vanguard Group, John C. Bogle, popularized investing in index funds. This type of investing is popular because indexes like the S&P 500 track the 500 largest companies in the United States.

There are other index funds, but S&P 500 funds are the most popular because they offer the most diversity. Many people invest in the S&P 500 because it’s had an average return of 7% – 10% per year for decades.

Best investment for: People who are new to investing as you don’t need to regularly check in and research different companies because index funds track the top companies in the U.S.

Risk level: Low

How to invest: Stock brokerage companies

Potential returns: Moderate

8. Exchange-Traded Funds (ETFs)

Exchange-traded funds (ETFs) are similar to index funds because your single stock has shares of multiple companies, but ETFs are usually for specific industries or categories. For example, ARK Invest is a well-known ETF that often invests in technology companies, and other ETFs have an assortment of bonds, like Vanguard’s Bond Market Index Fund (BND).

Best investment for: People with a moderate level of risk tolerance. ETFs can be thought of as a mix of index funds and individual stocks since they’re riskier than index funds, but they’re less risky than individual stocks because you’re more diversified.

Risk level: Moderate

How to invest: Stock brokerage

Potential returns: Low to high

9. Rental Property

Purchasing properties to rent out essentially makes you a business owner and can provide you with a steady flow of income. Plus, if the home appreciates in value, you can sell it later for a profit.

Although renting out properties can be fairly profitable, it’s important to know that they take a lot of work and can be high-risk. Similar to REITs, a housing market crash can harm your returns. There are other factors that can eat away at profits as well like repairs, missed payments from tenants, and paying property managers.

Buying rental properties also requires a bit of knowledge because you may need to make a lot of repairs to the home, which would eat into your profits.

Best investment for: Those who don’t mind dealing with tenants and handling property management. This is also better for people who have the ability to take care of additional costs like repairs and hiring property managers.

Risk level: High

How to invest: Real estate agent

Potential returns: High

10. Value Stock Funds

A value stock is a stock that appears to be much cheaper than what it should be. Those who invest in value stocks believe the market is wrong and is undervaluing a company. The idea is that once the market realizes that the company is much more valuable, investors will make a profit.

Value stock funds invest in various companies that are potentially undervalued. Although these funds can have high returns, they’re also a much higher risk. Sometimes, the market isn’t wrong, and these investments can lose money.

Best investment for: People with a long-term time horizon and high risk tolerance.

Risk level: High

How to invest: Stock brokerage

Potential returns: High

11. Alternative Investments

Cryptocurrency trading is a hot topic, but many people don’t fully understand how it works. Cryptocurrencies are a digital form of currency that’s traded on a network known as the blockchain. The first cryptocurrency was Bitcoin, and now, there’s an endless number of cryptocurrencies. Many people have become millionaires or billionaires from investing in crypto, but it’s an extremely volatile market, and many more have also lost their life savings.

Currently, there is very little to no regulation around cryptocurrency, and much of the investing involves speculation. Notable investors like Warren Buffett and his business partner Charlie Munger have been highly critical of crypto investing, calling it “worthless, artificial gold.”

While cryptocurrencies are the most popular alternative investments in recent years, there are others. Some people invest in commodities like gold, oil, and energy. You can also become an angel investor by investing in startup businesses. Similar to crypto, these are high-risk, high-reward investments.

Best investment for: People with a high risk tolerance and capacity.

Risk level: Very high

How to invest: Crypto exchanges

Potential returns: Very high

Should You Invest With Bad Credit?

Investing is a way to save for your retirement or future purchases, and it can increase your overall net worth. If you have bad credit or a lot of debt, it may be best to wait on investing because that money could go to paying off debt, improving your credit, and increasing your financial security.

If you’re looking for ways to potentially improve your credit, allow Credit.com to help. We have a ssubscription service like ExtraCredit®, or we can also provide you with a free credit report card with the Credit.com free subscription. Sign up today to get started.