July 11, 2023

Investing Considerations

To enjoy a comfortable future, investing is absolutely essential for most people.

Why invest? Investing can provide you with another source of income, help fund your retirement or even get you out of a financial jam in the future. Above all, investing helps you grow your wealth — allowing your financial goals to be met and increasing your purchasing power over time. Or maybe you’ve recently sold your home or come into some money, then it’s a wise decision to let that money work for you and grow over time.

While investing can build wealth, you’ll also want to balance potential gains with the risk involved. As 2020 showed with the COVID-19 pandemic, markets can become volatile very quickly. In March, the market rang up some of its biggest daily declines ever, followed by some of its strongest rises ever. After a strong sell-off early in the year, the market rebounded and set a new all-time high in the summer, despite an ongoing recession. Concerns surrounding the presidential election year may also be driving markets to be more volatile.

Regardless of the overall climate, you have many ways to invest — from very safe choices such as CDs and money market accounts to medium-risk options such as corporate bonds, and even higher-risk picks such as stock index funds. That’s great news, because it means you can find investments that offer a variety of returns and fit your risk profile. It also means that you can combine investments to create a well-rounded and diversified – that is, safer – portfolio.

What to consider

Risk tolerance and time horizon each play a big role in deciding how to allocate your investments. The value of each can become more obvious during periods of volatility.

Conservative investors or those nearing retirement may be more comfortable allocating a larger percentage of their portfolios to less-risky investments. These are also great for people saving for both short- and intermediate-term goals. If the market becomes volatile, investments in CDs and other FDIC-protected accounts won’t lose value and will be there when you need them.

Those with stronger stomachs and workers still accumulating a retirement nest egg are likely to fare better with riskier portfolios, as long as they diversify. A longer time horizon allows you to ride out the volatility of stocks and take advantage of their potentially higher return, for example. Be prepared to do your homework and shop around for the types of accounts and investments that fit both your short- and long-term goals.

If you’re looking to grow your wealth, you can opt for lower-risk investments that pay a modest return or you can take on more risk and aim for a higher return. Or you can do both and take a balanced approach, having absolutely safe money now while still giving yourself the opportunity for growth over the long term. Below are a range of investments with varying levels of risk and potential return.

Here are the best investments in 2020:

  1. High-yield savings accounts
  2. Certificates of deposit
  3. Money market accounts
  4. Treasury securities
  5. Government bond funds
  6. Short-term corporate bond funds
  7. S&P 500 index funds
  8. Dividend stock funds
  9. Nasdaq 100 index funds
  10. Rental housing
  11. Municipal bond funds

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