In this day and age, making a steady income is not nearly enough to achieve financial independence.
You need long-term investments to really grow your fortune. And a diversified investment portfolio can really help you multiply the money you’ve saved throughout the years.
There are many to consider, but here are several tools for building a long-term investment strategy.
5 Long-term investments
Stocks can be intimidating because of how the market is portrayed in the media. It’s true that it can be a volatile financial market, especially since it’s dependent on factors like the economy. But if you’re in it for the long haul, you don’t have to resort to panic selling.
Investing in stocks basically means buying shares from a company. When that company’s valuation goes up, the value of the stocks you own also increase and vice versa. The stock market fluctuates on a daily basis and experts say that for long-term investors, it ‘pays to wait it out’. The market will eventually even out and you’ll get your return on investment and more later on.
Compared to stocks, bonds are generally considered safer investment tools. By investing in bonds, you’re essentially loaning your money to a bank. Governments and corporations then use these to fund their projects, which they eventually have to pay back. The returns for bond investments are generally lower given the lower risks involved. But if you want a no-fuss investment with less volatility, bonds allow for a more stable long-term strategy.
Mutual funds are already a diversified investment vehicle. They consist of stocks, bonds, and assets that you buy into and own. Given their diversity, mutual funds are also considered low risk. Your exposure to risks like market crashes — they are reduced compared to investing all your capital into one asset.
However, the management of mutual funds can be costly. Companies usually charge high rates and hidden charges.
Forex is short for foreign exchange. That means forex trading involves the buying and selling of global currencies, like the US dollar in exchange for the euro. There are many ways to participate in the forex market and one example is exchanging your currency when you travel overseas.
However, you can also learn to invest in it by trading, which involves speculating on the price changes of a pair of currencies. You then choose to buy and sell depending on your analysis of factors at play. These include economic and political stability. While trading forex requires a bit more work, you can also implement a strategy that allows you to wait out market fluctuations. This is called positional trading and it lets you take a long-term approach to your investment.
Compared to the others, real estate is a tangible investment. Many experts consider owning real estate as the best long-term investment. This is because the value of your property appreciates, protecting you from the fluctuations of the housing market. Additionally, you can make a semi-passive income from leasing out your property.
However, real estate requires a much bigger capital compared to other investments. And becoming a landlord is not an easy feat — it entails major responsibilities that you need to consider.
All of these long-term investments are great opportunities for anyone who’s looking to build their wealth. However, each one also comes with its own risks and challenges. It’s best to consult with a financial advisor to figure out which investment instrument is the right one for you.