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Regardless of whether you use a traditional financial advisor, a robo-advisor or you do all your investing yourself, there are myriad ways to invest your hard-earned cash. Numerous platforms, including brokerage firms like Charles Schwab, Fidelity and Vanguard, let you oversee your portfolio and make trades in real time. You can even invest using any number of mobile apps, which is crucial if you typically do all your investing on the go.
But investing for long-term growth is much different than day trading, and the investments you select need to reflect your extended timeline. For example, your investment choices should be different if you’re investing with a 20-year or 30-year timeline than if you need the cash next year.
With that in mind, we reached out to several financial advisors to find out about their favorite long-term investments that help build wealth over time. Whether you’re dollar-cost averaging or throwing in lump sums of money whenever you can, here are six investment options that can help you build wealth that lasts.
Anna Rathbun, who serves as chief investment officer of CBIZ Investment Advisory Services, says the stock market is typically a good bet for long-term growth since, historically, it’s always gone up over time. But not all stocks are created equal, she says, adding that some are more growth-oriented in style and others are more defensive in nature.
To help diversify as much as possible, Rathbun suggests investing in index funds that provide exposure to a broad market, such as the S&P 500. “Indexing is also a low-cost option for fee-sensitive investors,” she says, which is important since long-term investors don’t want to be eaten alive by fees.
However, Rathbun adds that investing in equity markets means you’ll need to be able to withstand short-term volatility, and it’s important not to react to temporary shocks.
Mel J. Casey, a senior portfolio manager at FBB Capital Partners, points out that investing in passive funds like ETFs is another winning strategy to build long-term wealth.
ETFs have grown in popularity since they allow investors to get needed exposure to an area of the market quickly and efficiently. ETFs also provide attractive diversification with low ongoing costs, which is another major benefit for long-term investors trying to maximize returns.
Best of all, ETFs are easy to purchase with any number of brokerage firms, no matter whether you’re investing within a retirement account like a traditional or Roth IRA or in a separate brokerage account.
Real estate is another type of investment that can pay off in spades over time. This is particularly true if you have the desire and time to be a landlord, and if you can get renters to help you pay off your property over 20 or 30 years. Then once you own your rentals outright, the income they generate can be a huge boon for your retirement.
However, not everyone wants to be a landlord, which is why Rathbun suggests investing in Real Estate Investment Trusts, or REITs. REITs let investors bet on real estate without having to manage individual properties.
“REITs may not provide the type of growth that investors might find in tech stocks, but the higher yield profile and tax-friendly characteristics make REITs attractive for more income-oriented investors,” says Rathbun.
Casey of FBB Capital Partners also says investing in individual companies can be a winning strategy, especially since you can choose companies that align with your style or personal values. However, not everyone has the desire or the risk tolerance to invest in individual stocks for the long haul, in which case they should hire an investment advisor to professionally manage their assets for them.
Financial planner Dallin Cutler of EP Wealth Advisors also adds that, either way, the key for long-term stock investments is making your peace with the volatility this strategy brings.
“If you’re invested for the long term, just accept this likelihood and don’t look at your account when we have an extended market decline,” he says. “Stay disciplined and allow those stocks to increase in value long term.”
While financial experts don’t always agree on whether crypto should make up any part of a long-term investment portfolio, some say those with a healthy risk tolerance should consider it. Financial advisor Daren Blonski of Sonoma Wealth Advisors is one such advisor, although he suggests not betting the farm on this form of digital asset.
“Having a small allocation to bitcoin is a good long-term strategy for growing your money over time,” he says. As an alternative, you can also consider putting your money into an investment trust such as Grayscale Bitcoin Trust (GBTC), which offers the chance to gain exposure to bitcoin through a traditional investment vehicle.
With that said, investors interested in using crypto to build long-term wealth need to carefully consider the drawbacks and advantages to owning the public and private keys to their own bitcoin before investing. After all, bitcoin and other digital assets require a different level of safety and security than other types of investments.
“Consumers need to be well educated and take the time to do the research necessary or hire someone knowledgeable and experienced in this arena to help them,” says Blonski.
Finally, never forget that you are also an asset that can help build wealth over time. Financial advisor Christopher Clepp of Building Towards Wealth says there’s often no better return on investment than investing into your own personal and professional growth.
Clepp offers examples such as going back to school for an additional certificate or degree, starting a business or expanding an existing business in a strategic way. Other ways to invest in yourself could include taking online courses or joining a mastermind group. Even taking the time to learn more about personal finance and investing can also yield excellent returns.
Whatever path you choose, an investment in yourself can pay off handsomely at any point in your career. Clepp says this is especially true for people who invest in their own start-up.
“If you manage the risks around your business and maximize the benefits of business ownership, you can make work optional at an earlier age,” he says.
As you look for the best ways to invest for the long haul, there are plenty of important considerations to keep in mind. This includes taxes and fees, both of which can make your investments less efficient and eat away at your returns over time.
Casey points out that funds dedicated to retirement should be invested in tax-advantaged accounts like IRAs and 401(k)s since they provide significant advantages in terms of tax-free compounding over long periods.
Also, investors should closely examine any fees associated with the investments they’re considering, whether they want to invest in REITs or mutual funds. Investors who are fee-averse can also seek out options that aren’t actively managed, such as index funds and many ETFs.
Finally, remember that high return investments always come with higher risk, and that your time horizon and risk tolerance should be taken into account. In that respect, Clepp says investors should think of their long-term investments as a ship.
“The ship is built to weather the storms,” he says. “If your first inclination is to abandon ship when the financial storm hits and there is always going to be another storm, then you probably have the wrong investment for you.”
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