If you’re wondering where you will invest your idle cash, the article will give you the ten best investment options for 2021. While other investments offer high returns but with considerable risks, others involve low risks with low returns.
1. Real estate
Real estate is an excellent choice of investment in 2021. This market is doing very well and is expected to grow significantly. The demand for housing is increasing, and it is likely to remain high in years to come.
For your investment to be successful, you must set your property up in a location that will increase its value and rental income. Investments in real estate provide returns in the form of rentals and capital appreciation without spending money on the stock market.
However, real estate is illiquid as it lacks public markets and involves complex transactions. Besides illiquidity, acquiring the required regulatory approvals in real estate takes time.
2. Bond funds
Bond funds can be mutual funds or ETFs, and they consist of many bonds from different issuers. These funds are classified based on the bond type in the fund, the issuer, and its risks. There are a variety of bond funds where you choose the ones that perfectly meet your needs. The bond fund is a safe investment that you should consider, especially if the government backs it.
However, an increase in inflation and interest rates decreases the purchasing power of bonds.
3. Debt mutual funds
If you want an investment that will give you steady returns, debt mutual fund schemes are the best choice. You can invest in securities that generate fixed interest, such as government securities, commercial paper, corporate bonds, and treasury bills.
The potential risks associated with debt mutual funds include credit and interest rate risks. Therefore, you need to research the risks associated with these funds before investing.
4. Small-cap stocks
Small-company stocks have a more significant potential to grow fast over time. For example, Amazon was initially a small-cap stock, and investors who had invested in it ended up prosperous. A successful small-cap stock can give you significant returns.
5. Digital currency
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A growing number of investors are investing in cryptocurrencies. Bitcoin is the most popular digital currency, and it’s highly volatile, which attracts many investors.
If you’re a risk-taker investor who is open to losing money in the hope of high returns, then cryptocurrency might be for you. The prices of digital currencies are highly unpredictable since they rise and fall at any time.
6. Certificate of deposits
The federal government insures certificates of deposits, which offer fixed interest rates for a specific period. Having a CD means you receive regular interest payments from financial institutions.
Certificate deposits are best for retirees as they provide greater security and higher returns. CDs are available in a variety of types, so you can pick one that meets your needs.
7. Index funds
An index fund holds stocks in a specific market index such as the S&P 500. It provides investment returns equivalent to the primary index’s performance. If you are looking for long-term savings, mutual funds are the best choice. They are cost-effective and less volatile.
8. Gold
Gold is a haven of investment as it is less volatile than many investments. It has a higher value than keeps soaring as the fiat currencies drop. This value makes gold worth investment as its prices keep rising. If you missed one of our previous articles related to Gold vs Bitcoin, you can read it here.
9. Treasury Inflation-Protected Securities
TIPS are government-backed securities with inflation protection. It’s a government bond that makes interest payments twice a year.
TIPs are the best investment choice as their value rises with increasing inflation. Additionally, the interest rate and the principal value of the bond increases with high inflation.
10. Individual stock
Stocks have high potential returns and are volatile. If you are an investor with a diversified portfolio and you are willing to take risks, the individual store is the investment for you. You can buy stock from online discount brokers.
Tips for choosing the suitable investment
Evaluate your risk tolerance: how much can you withstand risks such as significant drops in your investment value? If you are willing to take high stakes, then you should go for high returns investments. However, if you’re a conservative investor, less risky investments are the way to go.
Consider your time horizon? Time horizon means after how long you need the money. For a shorter time horizon, choose safer investments such as bonds and Certificate Deposits. You can take risks with more volatile investments if you have longer time horizons. For example, you can invest in stocks that hold them for over four years as you aim for higher returns.
What is your investment expertise? Some investments require little to no knowledge, such as CDs, while others, such as bonds and stocks, require more knowledge. Investments that require knowledge will require you to study them carefully to gain a complete understanding.
Your financial status: investments that require more money are worth it as they offer higher returns but involve significant risks. You can still invest your small funds in investment options with fewer risks.
Bottom line
Investment is a powerful method of gradually building your wealth for future use. There are many investment options you can choose from depending on your long-term or short-term goals. Most investments with high returns are riskier, unlike those with low returns.
If you want to start your investment journey, it’s advisable to study what each investment offers and whether it fits your financial plans. You can start investing by opening a brokerage account. Of Course, some assets may require huge finances, but that doesn’t limit you to creating your investment journey as some are relatively affordable. So, invest now and begin to accumulate your wealth.
