If you want to increase your wealth and reach financial goals like retirement, taking advantage of investment opportunities is critical. For many people, investing is the only way to save enough money to retire.
With many investments to choose from, it can be challenging to know where to start. Unfortunately, the overwhelming amount of choices can keep people from getting started with investing.
In this article, we’ll break down ten of the most popular investment opportunities to help you grow your wealth.
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Top Investment Opportunities
Before you start investing, it’s important to understand the available options and the potential risks. You should also know how to go about investing in each opportunity.
Here are ten of the most common investments to help you reach your financial goals.
Most people automatically think of the stock market when they think about investing. That makes sense since stocks are one of the most common and accessible investment opportunities.
Buying stocks is usually profitable in one of two ways:
- Sell stocks for a profit if their value increases post-purchase
- Investing in dividend stocks
With dividend stocks, companies distribute a portion of their profits to shareholders. Dividend stocks can provide a recurring source of income for investors.
Many people own stock without realizing it through their employer-sponsored retirement plan. You can also buy stocks online through a brokerage account.
When buying stocks, you can invest in individual companies or use exchange-traded funds (ETFs) and mutual funds to invest in multiple companies combined.
Bonds are a debt security that governments and corporations issue to raise capital. When you invest in bonds, you’re basically lending the issuing organization money.
These organizations make regular interest payments to bondholders. Then, they pay back the entire principal when the bond reaches maturity.
Bonds and other debt securities are known as fixed-income securities since they generate a regular stream of income for investors.
Debt securities are usually considered to be lower-risk investments. However, they typically result in a lower return than stocks.
You can invest in bonds by purchasing individual bonds from governments and corporations or investing in funds that include bonds.
3. Real Estate
Investing in real estate has become one of the more popular investment opportunities. A recent Gallup poll found real estate to be the favorite long-term investment for Americans.
There are a few ways to invest in real estate. One option is to buy residential properties to rent out to tenants. This type of investment results in regular cash flow thanks to monthly rent payments.
Keep in mind that renting properties can require a significant time investment if you don’t hire a property manager. Additionally, you’re financially responsible for all maintenance issues and repairs.
Another way to invest in real estate is by flipping houses. Many people buy a fixer-upper, renovate it and sell it for a profit.
Finally, you can invest in real estate passively through real estate investment trusts (REITs). These are traded like stocks on major exchanges. Investing in REITs provides a recurring stream of income.
4. Commodities and Gold
Popular commodities include:
- Crude oil
- Natural gas
Investors can buy the actual raw materials or invest in commodities futures, stocks or mutual funds.
Investing in gold and other commodities can be an effective way to diversify your portfolio and potentially see large returns. That said, commodities markets can be volatile, so there’s a risk of losing your money.
To invest in gold or other commodities, decide if you want to invest in stocks, futures, funds or the physical assets themselves. Then, use your brokerage account to complete the transaction.
Cryptocurrency is a digital currency that investors can buy and sell or use to buy goods and services.
Some of the more popular cryptocurrencies include:
These currencies are decentralized, meaning there’s no central government agency that controls them. This has been the appeal for many investors since they can bypass the traditional financial infrastructure.
There are several brokers that investors can use to buy Bitcoin and other cryptocurrencies. Coinbase is specifically designed for trading digital currency, and Robinhood recently entered the crypto space.
Other major brokers like Charles Schwab and TD Ameritrade don’t allow you to purchase cryptocurrency directly. However, you can invest in cryptocurrency futures.
Before investing in cryptocurrencies, make sure to do your research and keep in mind that they’re a speculative, high-risk investment. There’s little historical data to look at to determine just how volatile they may be.
6. Exchange-Traded Funds (ETFs)
An ETF is a fund that holds different securities. These are usually stocks, bonds or a mix of the two. ETFs can be an excellent way to diversify your portfolio with just one investment.
There are many different ETFs you can buy. Some track a particular index, like the Dow Jones Industrial Average or the S&P 500. Others have underlying investments in a certain industry, company size or type of bond.
Similar to stocks, ETFs are traded throughout the day on major exchanges like the New York Stock Exchange and Nasdaq. Some are actively managed, but many are managed passively.
To start investing in ETFs, log into or create an online brokerage account and choose which ETF you want to purchase.
Be sure to do your research, as different ETFs have different historical performances and varying fees. Try to find an ETF with a solid performance and low expense ratios.
7. Mutual Funds
Mutual funds hold a variety of stocks and bonds. When you invest in a mutual fund, you essentially pool your money with other investors to purchase the underlying assets in the fund.
One of the ways mutual funds differ from ETFs is that they trade at the end of the business day when the market closes. Also, since they’re actively managed, they often come with higher expense ratios.
Like ETFs, mutual funds can be a great option for those who want to invest in stocks and bonds but don’t want to choose their own assets.
When investing in mutual funds, you must have a brokerage account. You can invest in mutual funds either through your tax-advantaged retirement account or a taxable brokerage account.
As you consider your options, pay attention to each fund’s performance history as well as the expense ratio. The lower your fees, the more of your investment returns you get to keep.
8. Peer-to-Peer Lending
Peer-to-peer lending is when consumers borrow money from other individuals rather than financial institutions.
This type of lending benefits the borrow and the investor. The borrower has an opportunity to get a loan when they may not otherwise have been able to. Investors can earn a profit from the interest on the money they lend.
Peer-to-peer lending usually takes place through a company that facilitates the transactions. They vet borrowers, then connect them with investors who are willing to lend them money.
Popular peer-to-peer lending sides include:
The risk of this type of investment is that the borrower could default on their loan. If they fail to pay back what they’ve borrowed, an investor is unlikely to recoup their losses.
To start investing with peer-to-peer lending, research the different platforms available. Make sure you understand the loan terms and your rights as an investor.
It’s important to consider the risk you take on with each loan. Many platforms allow lenders to choose which loans they’ll invest in, and they’re often rated based on a borrower’s credit score and debt-to-income ratio.
Loans to more creditworthy borrowers are generally less profitable but have less risk for the investor.
A special purpose acquisition company (SPAC) is a type of shell company that goes public and raises capital to acquire or merge with an existing company.
SPACs often operate differently from a traditional company. Unlike regular companies, they don’t have a product or service when they go public.
Investing in SPACs can be dangerous because there’s no way to know what the outcome will be. Some SPACs form with the intention of buying a specific company or entering a particular industry, but that’s not always the case.
If you invest in SPACs, do your research and treat it as a long-term investment. There are often years between the time a SPAC goes public and when it successfully merges with or acquires a profitable company.
When it comes to investing in SPACs, you can identify an individual SPAC to invest in. Alternately, you can look into SPAC ETFs that let you invest in many companies at once. This can help you diversify your portfolio.
10. Art and Collectibles
Art and collectibles are alternative investment opportunities that provide another way to diversify your portfolio.
Investing in art is generally a long-term game. You buy a piece of art or another collectible and hang onto it for an extended period, hoping it increases in value. If that happens, you can sell it for a profit.
Investing in art comes with some risks. Holding a valuable collectible doesn’t result in cash flow in the same way that dividend investing or bond investing does.
Another thing to consider is that art investing takes a considerable amount of research. You need to have a deep understanding of the industry and how likely an investment is to increase in value.
For those who have the time and knowledge to get into this type of investing, it can be profitable.
To invest in art and other collectibles, start by doing your research. Find books and online resources to help you learn more about the type of art you’re considering.
From there, look into local and online auctions to see what pieces are available. Research the artist and the piece. Also, consider hiring a broker to help you close the deal.
Frequently Asked Questions
Before choosing any investment opportunity, you’ll likely have some questions. Here are answers to frequently asked questions that might be helpful.
When you’re investing for the first time, it can be difficult to know where to start. In most cases, it makes sense to start with your employer-sponsored retirement plan and choose from the investment options available there.
As you select your investments, be sure to build a diversified portfolio by considering your time horizon and risk tolerance.
It’s advisable to start investing as soon as possible. The purpose of investing is to grow your wealth. In many cases, this happens through compounding over time.
The earlier you start investing, the longer your money has to grow.
All investment opportunities carry some level of risk. Often, it’s the risk that you will lose money if the asset decreases in value.
A well-diversified portfolio can help to mitigate that risk by ensuring that if one investment performs poorly, it doesn’t harm your entire portfolio.
There isn’t necessarily one investment option that’s better than the others. The key is finding the best investment option for your situation.
Ultimately, you should make sure the investments you choose fit your risk tolerance and financial goals.
When done correctly, investing can help you build wealth and financially prepare for the future.
From traditional asset classes, like bonds and stocks, to alternative investments, like commodities and cryptocurrencies, it can be challenging to know which option to choose.
These ten investment opportunities are some of the most popular choices and can be a great place to start when building your portfolio.