Investors looking to invest for the long term need to buy and hold assets for years or even decades. Determining which long-term investments are best for you will ultimately depend on your risk tolerance and financial goals.
To help you decide, here are some long-term investment options you can consider.
Stocks are perhaps the best choice for long-term investing. With stocks, there are several investment options. You can bet on individual stocks, or you can choose stock index funds and exchange-traded funds (ETFs), which many investors typically choose.
Equity-focused funds, such as the S&P 500 Index Fund, allow you to hold small portions of different stocks simultaneously. In addition, your portfolio benefits from the diversification benefit of the fund, which reduces the risk of any investment that causes you to lose money.
Another long-term investment under stocks are growth funds which are ETFs or mutual funds that invest in growth stocks.
Instead of dividend-paying companies, growth funds focus on companies with excellent earnings or revenue growth. This means that growth funds generate returns for investors through rapid price appreciation.
On the other hand, value funds invest in companies that are considered undervalued in terms of price based on fundamental factors.
Value funds can bring stability to your portfolio since they focus on more stable, well-established companies with long histories of paying consistent dividends, despite the possibility that their future growth may slow.
Growth funds tend to perform well when interest rates are low and economies are expanding. Meanwhile, value funds have proven effective when the economy contracts and the funds used by growing companies to support their development are exhausted.
Investors willing to take the risk can consider holding crypto investments for the long term. However, this approach may seem less than ideal considering that cryptocurrencies have only been around for over a decade and are highly volatile.
Still, there are some cryptocurrencies that you can buy and hold for long periods of time. You can put money into a few individual coins, or you can consider other options for entering the crypto market.
That said, you should always exercise caution when investing in cryptocurrencies because not only are they highly volatile, but their value is also unproven. Therefore, one good thing you can do is put only a small portion of your investment into these digital assets.
Bonds are another long-term investment option to consider, especially if you want something less risky than stocks and equity-oriented funds. Indeed, bonds are less risky because they provide a steady stream of income and holders have the right to receive payment before shareholders if the company goes bankrupt.
Government bonds tend to be the safest, while corporate bonds can be categorized into low-risk, high-quality, and junk bonds with attractive interest rates and high risk of default.
Many choose bond funds over individual bonds because these bonds can be quite difficult to buy and individual investors need to have some diversification.
In addition, bond income is relatively low at present, with current interest rates being significantly low. Many investors are expecting interest rates to rise soon, which is likely to drive down the value of many bonds.
Nonetheless, excellent long-term bonds can still provide investors with income while facing less volatility than stocks. Some of the great long-term bond funds include bond funds and ETFs, as well as government bonds, such as Treasury Inflation-Protected Securities (TIPS) and I Bonds.