Investing is essential for individuals looking to live and enjoy a comfortable future. As 2020 demonstrated, a seemingly stable economy can go so south fast, leaving those who didn’t prepare struggling to get by. However, those who held onto their investments have done better than most, as the market reached new all-time highs last year.
It provides you with another source of income, helping you get through even the most challenging financial situations. Above all, investing can grow your wealth, helping you meet your financial goals, and boost your purchasing power in the long run.
It’s wise to let your money work for you, and the following investment options can bring you great wealth in 2021.
Build Your Cash Reserves
As the previous year proved, it’s wise to adjust your expectations in the market and always have some finances tucked away since there’s no “true” way of counterbalancing losses in your investments. Building your cash reserve helps you maintain its value regardless of what state the financial market is in and provides enough capital to buy stocks when you come across great bargains.
With the ever-fluctuating economy and stocks ending 2020 in record territory, the best investment strategy is building up your cash reserves, providing ample liquidity, and leaving you better prepared for whatever’s next. The size of your cash reserves will depend on your situation.
For instance, if you have run a company, it’s best to conduct a business valuation to understand the factors that create value for your brand and see where you lack. Doing this gives you a reasonable estimate on how much cash you should have reserved, helping you continue operations and keep your business alive regardless of the global economy’s state.
High-Yield Savings Accounts
Just like a regular savings account that earns pennies at your traditional brick-and-mortar banks, high-yielding online savings accounts are accessible and are great options for your cash. Since all the processes are handled online, you’ll face fewer overhead costs, helping you get much higher interest rates. Plus, it gives you convenient access to your money, quickly transferring it to your primary bank or via an ATM.
This investment works best for risk-averse investors and those who need cash short-term. The FDIC usually insures banks offering high-yield savings accounts, so you don’t need to worry about losing any of your deposits. However, like CDs, despite being safe investments, you run the risk of earning fewer reinvestments thanks to inflation. But savings accounts are known to be as liquid as money gets, allowing you to deposit and withdraw funds any time.
Dividend Stock Funds
When placing your money on stocks paying dividends, even your stock market investments can become a bit safer. These are portions of a business’s profit that can be paid out to its shareholders, typically quarterly. Having dividend stock funds helps you gain on your investment through long-term market appreciation while earning more cash in the short term.
Whether they pay dividends or not, purchasing individual stocks is ideal for intermediate- and advanced-level investors. However, you can also buy groups of them to reduce your risk. It’s a perfect investment option for those looking for additional income. However, just like with any stock investment, a dividend stock fund comes with significant risk but is generally considered safer than growth stocks and other non-dividend stock funds.
When it comes to liquidity, dividend stock funds are as flexible as it gets, as you can buy and sell your funds on any day the market is open—with quarterly payouts being the same. Consider reinvesting your dividends for the highest possible returns.
If you’re looking to break free from employment and want to be your boss, rental housing is one of the best investment options for you. That is if you also have the willingness to manage properties—and with mortgage rates hitting rock bottom recently, now’s the time to finance the purchase of new properties. However, with the ever-fluctuating economy, it can be challenging to run these properties since tenants will likely default due to unemployment.
This investment can go a long way if you make smart purchases. But investing in rental housing is tedious as you’ll likely always be on-demand and will be buying and selling assets in the stock market often. Rental housing is a great investment option for long-term investors looking to generate regular cash flow.
The most significant risk with this investment option is its lack of liquidity, leaving you cashless if you need money fast.
As the world gets used to digital processes, ranging from work, school to shopping, cryptocurrency is quickly becoming the most popular medium of exchange in modern society—with Bitcoin becoming the top digital currency today. This investment option has been a go-to option for many as money has flown into it, bumping up prices and drawing more traders to it.
However, this investment option is riddled with risks as it’s not backed by the FDIC, meaning its worth is determined solely by what investors are willing to pay for it. They’re generally liquid.
Investors have many options, from low-risk and lower-return assets to risker and higher-return ones. However, if you’re looking to make it big this 2021, investing in any of the investment options mentioned can immensely help grow your wealth in the new decade—and beyond.