Investments are essential for many people nowadays. It’s a vital business transaction to help them finance their future goals and plans. However, not many people know which are the prime investments in this current generation.
Prime investments are those known to have good interest rates compared to the given market but have a good enough risk for the ROI they can give you. Essentially, these are balanced investments, making them a smart choice for newer investors. In this article, we will explore the best investment options for you. But first, let’s get started with the basics.
The first step into starting your investments is to open a savings account. But first, let’s differentiate between a savings account and a checking account.
A savings account is essential for your savings. It gains interest over time, making it a good place to put the money you don’t use. A checking account is for your everyday use. It doesn’t gain any interest, so it’s good for the money that you always use. So if you’re planning to open a checking account, make sure you’re placing money that you’re going to be using. You don’t want to put all your money into a checking account thinking that it’s a sound investment.
A savings account is their first investment for most people because it does have interest, albeit very little if we compare it to others in this list (around 0.004%). You might want to transition to a high-yield savings account later in the future. It might increase how much you can withdraw from your account, but at least the annual percentage yield (APY) is much higher. Now let’s get into things that actually get you money.
Certificate of Deposit (Time Deposits)
Certificate of deposit, also known as Time Deposits or CD, is one of the safest investment options you can make with a bank. Opening a high-yield savings account and a CD can yield you an APY of around 3% yearly. But this investment combo isn’t meant for people who like to spend a lot of money.
CDs are technically deposits you promise to not touch for a year. High-yield savings also account limit how much you can withdraw from that account. So both essentially cut down your spending. But if you’re frugal and you want a constant increase in deposits you don’t want to use, then this is the safest investment option for you.
Index funds are essentially stocks but compiled on top of one another. So technically, you’re purchasing smaller stocks from different companies and putting them into one account. It has less yield but also minimizes risk. Its yield is also much higher than what banks offer nowadays at around 10%. That’s a decently high interest rate for an investment option with minimal risk.
Next on this list is rental housing. Since housing prices have skyrocketed this year, more people are willing to rent a home in hopes of weathering the storm. This is why rental housing is such a good option this year.
To start down this path, you can get a mortgage to purchase your first property. Mortgage rates are so low this year that you can essentially earn a lot more by investing in this option. Then you can start managing that property and earn money from your tenants. It’s that simple! However, it’s important to note that this option does fluctuate quite a lot because it’s a competitive market.
Cryptocurrency can easily be the investment option for many millennials. Considering that it’s become integrated into our daily lives like purchases, it’s looking like a good investment option for anyone.
To get started in crypto, you’re going to need to choose a crypto exchange. There are many of them right now, such as Coinbase and Binance, all of which are robust options to get you trading. Then, you open an account to that crypto exchange site and start funding that account. You should also get a digital wallet because cryptocurrency does not have a banking institution to protect your funds.
Which One Is the Best for Your Risk Appetite
Let’s talk a bit about your risk appetite. A risk appetite is all about how much risk you’re willing to take. If you have a low to moderate risk appetite, you technically don’t like risk. On the other hand, if you have a high-risk appetite, you like a risk because it yields higher rewards for you.
For people who have a low to moderate risk appetite, we suggest that you invest primarily in CDs and index funds. These are known to be safe investments with minimal risk. That’s what makes them so good! But for people with a high-risk appetite, rental housing and cryptocurrency are for you. These investments fluctuate a lot, but the yields are also much higher. But remember that cryptocurrency isn’t covered by the FDIC, which means that you’re liable for your own losses, illegal or not.
Investing as early as now means financing your goals in the future. And now that you know the best investment options this year and which ones fit your risk appetite, it’s time to go on investing.