If you want to ensure your long-term financial stability, you need to make long-term investments. As anyone who’s lived through the past few years can attest, short-term investments can move any which way. The most reliable investments are designed to build slow, steady gains over a long period. Here, we’ll discuss 15 of the best long-term investments in 2022.
The 15 Best Long-Term Investments For 2022
There are any number of ways to invest for long-term gains. We’ve chosen to focus on these methods:
Real Estate Crowdfunding
High-yield Savings Accounts
Target Date Funds
[ Want to create a roadmap to a financially secure retirement? Register for our FREE online real estate class to learn the powerful wealth building strategies real estate investing has to offer. ]
1. Real Estate
A real estate investment can be one of the most profitable long-term investments you can make in terms of pure potential. Of course, market conditions need to be suitable to begin with – some areas have seen massive property value losses, even as the market as a whole moves in a positive direction.
One nice thing about real estate investments is that you can use one property as leverage to buy another. Suppose you’ve paid off a single rental property. You could take out another mortgage and use the money to put down payments on multiple other properties. As long as you can afford all those mortgages, you can multiply your number of rental properties in no time at all.
Real estate investments can get expensive. Even for a small property, you have to come up with a down payment. Not only that, but there can be unexpected expenses and repairs. You may also go for some time without earning any money, if it turns out that you have trouble renting a particular unit.
A real estate investment trust (REIT) is a good way for individual investors to profit from the real estate market, while diluting the risk. In a REIT, you’re buying shares of a larger holding company that owns and manages properties, typically commercial properties. You won’t have the same control you will over your own personal properties, but you also won’t have to deal with any of the headaches.
3. Real Estate Crowdfunding
Real estate crowdfunding is similar to a REIT in that multiple investors are pooling their money. However, while REITs manage multiple properties, crowdfunding allows you to pick and choose individual properties to invest in. But while you can buy and sell shares of a REIT at will, your investment in a crowdfunding operation is typically locked in place for years.
With crowdfunding, you’re helping to service a private real estate loan. In return, you receive regular annual payments that can be as high as 14% of your original investments. In some cases, you may have to be an accredited investor. On the plus side, some platforms allow anybody to invest in a real estate project, with investments as low as $500.
4. High-yield Savings Accounts
A high-yield savings account won’t earn as high a return as most other long-term investments. However, a savings account’s performance is guaranteed, which you can’t say for stocks, bonds, and other financial instruments. As a result, putting some money in savings is a good way to hedge against short-term market downturns and keep an emergency fund readily available.
When you choose a savings account, look for an online bank. These banks have lower overhead, which allows them to pay higher rates than brick-and-mortar banks.
5. Growth Stocks
Growth stocks are stocks that are poised to deliver the highest returns. In recent years, these have tended to be tech stocks, but that’s not always the case. Healthcare stocks, for example, have done very well in recent years. The common denominator is that these are fast-growing businesses that don’t pay a dividend – they’re too busy putting those profits back into the business!
Along with their high potential rewards, growth stocks come with higher risks than more established companies. There’s also a risk that the stock can be overvalued compared to the company’s current value. Even if the underlying business model is sound, the stock price will suffer if growth levels off.
6. Stock Funds
Buying and selling individual stocks involves a lot of effort. You have to keep an eye on the market and constantly read up on whatever industries you’re invested in. Not only that, but you’re exposed to a lot of risk. If the particular company you’re buying doesn’t do well, you can end up losing money.
A stock fund is a simple solution to that problem. With a stock fund, you’re pooling your money with other investors to purchase a variety of stocks. Some of these funds are focused on particular industries, while others are pegged to a particular index, such as the S&P 500. This spreads out your risk across various investments, so you’re not putting all your eggs in one basket.
7. Bond Funds
A bond fund is similar to a stock fund in many respects. The main difference is that instead of investing in a pool of stocks, you’re investing in a pool of bonds. As long as your money remains in the fund, you’ll get a regular payout as various bond payments roll in.
Stock and bond funds both fall into two broad categories. There are mutual funds, which have a high minimum investment and are run by a financial manager. There are also exchange-traded funds (ETFs), which are traded on an exchange like a regular stock. Which type of fund is right for you will depend on your financial situation.
8. Dividend Stocks
Dividend stocks are the opposite of growth stocks. Instead of fast-growing companies, these are established market leaders with little opportunity for further growth. Think about companies like Cheveron, 3M, and Edison International. Because these companies aren’t reinvesting a lot of their profits, they’re free to issue dividends to their shareholders.
Keep in mind that no investment is guaranteed. While dividend stocks are considered safer than growth stocks, their values can still go up or down with the market.
9. Value Stocks
Value stocks are stocks that are undervalued based on certain metrics that are used to determine valuation. For example, a company’s stock might be priced well below where it should be based on their price-earnings ratio. This contrasts with growth stocks, which tend to be overvalued.
Value stocks tend to perform well in times of rising interest, and they also tend to overperform during recessions since they were undervalued to begin with. Both of these factors make them an attractive investment for 2022.
10. Roth IRA
A Roth IRA is a special type of individual retirement account that can save you a ton of money in taxes. With a 401(k) or traditional IRA, your contributions are made before taxes, and this saves you money in the short term. But when you retire, you’re taxed on your withdrawals, including on all the gains you’ve accrued over the years.
On the other hand, with a Roth IRA, you contribute post-tax income; your tax bill will be higher in the short term. But when you retire, your withdrawals will be tax-free. This means you can earn hundreds of thousands of dollars in gains, tax-free, over the course of your lifetime.
11. Small-Cap Stocks
Small-cap stocks are the smallest publicly-traded companies, with a valuation of less than $2 billion. These stocks come with higher risks than those for larger, more established companies. But small-cap stocks also have the potential for massive growth. Once upon a time, Apple and Amazon were both new, small-cap companies.
Annuities are insurance policies that guarantee a certain amount of payout after your retirement. You pay a certain amount of money, generally over the course of a few years. Then, when you turn 65, you receive a guaranteed annual income. The nice thing about this is that the money is guaranteed. On the downside, you’ll typically get better returns from an ordinary mutual fund.
13. Robo-Advisor Portfolio
A robo-advisor is an AI-powered service that manages your investments for you. For a fee of between 0.06% and 0.15% of your investment, they try to maximize your gains, much like a human financial manager. Robo-advisors can be more or less aggressive, depending on how their software is written.
It’s impossible to talk about investments in 2022 without talking about cryptocurrency. Cryptocurrency is notoriously volatile, and few people would advise investing in it as a short-term strategy. But over the long term, the “major” cryptocurrencies have the potential for significant growth.
If you’re interested in investing in this new asset, here are some ways to do it:
Crypto ETFs – These work similarly to traditional ETFs, but instead of purchasing a pool of stocks, you’re purchasing a cool of cryptocurrencies. Note that this is not the same as owning the coin itself, but the value of the ETF will float with the value of the underlying coins.
Crypto-related assets – If you want to profit from cryptocurrency without investing in crypto, why not invest in stocks for crypto exchanges and other blockchain companies? If nothing else, they’re less volatile than the actual cryptocurrency.
Cryptocurrency itself – Investing in an individual coin is like buying an individual stock. You get all the rewards that come from growth, but your risk is also concentrated in one place. On the plus side, cryptocurrency is being accepted for payment at more and more locations. As long as you don’t mind the risk, you can even think of your crypto wallet as a second savings account.
15. Target Date Funds
Target-date funds are a special kind of IRA or 401(k). You choose your target retirement date, and the fund allocates your money accordingly. The further you are from retirement, the more aggressive your investments will be. As you get close, your investments will become more and more conservative. This provides as much growth as possible, while minimizing risk when it matters most.
The Best Long-Term Investment Strategies
Before you invest your money, it’s essential to decide on a strategy. This will help keep you on track, and make sure your investments are geared towards your long-term goals. Here are 10 tips for developing an effective long-term investment strategy:
Balance Your Finances: Balance appears to be the key to everything in life, including your finances. Focusing too much on one type of investment over the other, or being overly aggressive with your strategy, could get you into trouble. Diversification is a great way to bring balance to your investment strategy.
Know The Business Of Your Investments: In this case, ignorance will not help you achieve bliss. If you are betting your valued savings on an investment, then don’t go into it blind! Do your due diligence and make sure you understand the mechanics of investments to inform your decision-making.
Begin Investing Early: Assets have a better potential to grow the longer they are invested. Any financial expert would encourage young people to start investing today, to ensure that you’re in better financial standing in the future. Someone who starts investing at the age of 20 will have a significantly larger return than someone who starts at 30.
Take Advantage Of A 401(k) Match: If your employer offers a 401(k) or other retirement savings matching plan, take advantage of it! This is essentially free money. Your employer may have some stipulations, such as a minimum contribution in order to be eligible. However, these conditions are a small price to pay when you’re doubling your savings.
Cash-Flow Management: Committing yourself to a cash flow plan is simple in theory, but maintaining your discipline is the hard part. Set up a system for yourself to automatically invest a percentage of each paycheck, so that you don’t feel like you’re missing the money.
Invest Discretionary Income: What are your needs? What are your wants? It’s easy to trick yourself into thinking that your wants are your needs. Experts advise that you wisen up and invest as much discretionary income as you can. This will take discipline, but you’ll be thanking yourself in later years.
Separate Investments & Cash Reserves: You can find yourself in a pickle if you are in need of quick cash, but all your money is tied up in investments. In an emergency, this might force you to sell your investments at a loss. Instead, protect your investments by building up a cash reserve in case of an emergency.
Make Stock Investing Essential: The S&P 500 index has provided an average 7 percent return for 20-year investment periods since the 1920s. Being in the stock market, especially with compound interest, should be an essential part of your strategy.
Diversify Your Investments: We can’t say it enough: diversifying your investments is the best way to protect against risk. Simply put, when one investment strategy fails, it’ll be less painful if you have backups in other areas. You can minimize your risk by investing in various assets that are characterized differently. Some examples include market capitalization, domestic vs. foreign, or growth-based vs. value-based.
Only Make Small Adjustments: Being a great investor is like being a good sailor. You never want to make jerky moves or changes, because you’ll unintentionally end up over-correcting and get undesirable results. Investing should be thought of as a long game, where only slight changes are made. Patience and holding steady are two characteristics you’ll need to develop.
The best long-term investments will set you up for success in the long term and leave you with enough savings to enjoy your retirement. And with these many types of investments, at least one is going to be right for your needs and budget. Start saving today, just a little bit, and you’ll reap the rewards in the long run.
Ready to start taking advantage of the current opportunities in the real estate market?
Whether you’re brand new to investing or have closed a few deals, our new online real estate class will cover everything you need to know to help you get started with real estate investing. Expert investor Than Merrill explains the best real estate strategies to help get you on the path towards a better financial future.
Register for our FREE 1-Day Real Estate Webinar and get started learning how to invest in today's real estate market!