There is no one-size-fits-all when choosing the best way to invest your money. Instead, it all comes down to your risk tolerance, goals and how long you plan to hold your investments.
I compared multiple investment options and chose the five best ways to invest your money based on the return rate, liquidity, how much activity and knowledge you need to have to invest and whether you are investing for retirement or not.
Robo-advisors are automated trading systems that invest your funds on your behalf. All you have to do is set up guidelines, such as your risk tolerance and preferred investment types, and the algorithm will allocate your funds and rebalance your portfolio accordingly.
What Matt thinks about robo-advisors
No-cost, algorithm-driven portfolios are a no-brainer for cost-conscious investors who want to outsource portfolio management. Many robo-advisors construct portfolios using low-cost ETFs, and this offers a simple solution to build a diversified portfolio without requiring much legwork on your part. You just need to focus on regularly investing.
— Matt Miczulski, Editor, Investments.
Investing in US government bonds is one of the safest investments you can make. That’s because the chances of the US government failing to pay off its debts are low — which is why this investment option comes with relatively low return compared to other options like stocks and ETFs.
Being a relatively new investment option among mainstream investors and institutions, cryptocurrencies are a high-risk, high-reward investment. What’s more, there are always new coins coming out or older ones getting the spotlight every now and then. Because of that, the rate of return could be way higher than investing in stocks. But since cryptos aren’t currently regulated, you could lose your entire investment.
Index funds offer one of the best risk/reward ratios for long-term investing. That’s because major indices have consistently gone up in the past 90 years. For example, S&P 500 has averaged a 10% annual return during this time. If you invested $500 each month for the past 30 years, you would now have about $1 million to retire on.
Stocks have the greatest variety of trading options because you can choose startup companies that are yet to explode, companies that pay dividends, companies that change the world and more. This way, you can directly control your risk and reap the benefits if you choose the right stock.
Now that you have a rough idea of the best ways to invest your money, here’s how to start.
Before you commit your funds, consider how long you want to keep your investment. If you’re nearing retirement, typically a low-risk investment, such as bonds, is the way to go. You would earn less, but the risk is minimal compared to index funds, stocks or crypto.
If you’re in your 20s and 30s, however, you have a long way to go before retirement. Setting aside some funds for riskier investment options like crypto is worth considering.
Investors who are just starting out or those who never had the chance to manage their portfolio should consider using a robo-advisor or consulting an expert. Investors who want to try their luck can always start by themselves, but in this case, make sure you use money that won’t impact your life if you lose it.
Depending on your goals and investment time frame, you can choose several types of accounts:
Depending on who manages your account, there are two types of investments accounts to choose from:
Once you open and fund your account, it’s time to put your money to work. Make sure to choose the best way to invest, depending on your financial situation and goals.
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Finder is not an adviser or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
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