If there is one thing 2020 has taught me, its the need to be financially secure. Having multiple streams of income is no longer optional but a necessity. The article aligns the best investments in 2020 that could set you off on the right path.
Investments builds wealth and could help secure a brighter financial future. Investments can be short-term or long-term depending on set financial goals. There are always investment options, whether you’re looking to grow your wealth or planning towards retirement. This article helps you understand the best investments to carry out in 2020.
Best investments in 2020
- High-Yield Savings Accounts
- Certificates of Deposits
- Real Estate
- Government Bond Funds
- Real Estate Investment Trusts (REITs)
- Treasury Securities
- Dividend Stocks
- Money Market Accounts
1. High-yield savings accounts
You know how easy it is to put your money in a savings account and leave it there for months. Well, high-yield savings accounts give you an additional interest than what regular savings accounts would offer.
You have the chance of earning more interest rates. This kind of investment is best for as a savings option and for those who need access to their money in the near future.
The best part about this investment is that it can easily be liquid. If you want You can take out or add more money at any time. The only risk attached to this kind of investment is the risk of earning less upon reinvestment as a result of inflation.
2. Certificates of Deposits
Certificates of deposits are time deposit, financial products sold by banks and have higher interest rates than most regular savings accounts. If you are willing to have your money locked up for a certain period then, this investment is for you.
How it works is; you cannot withdraw money at any time until the maturity date. After a certain period, your money will be accessible to you along with your interest paid to you by your financial institution.
Some banks would pay you a 2% APY if you can have your money tied up for five years or more. This kind of investment is very similar to the high-interest savings account. The only difference is that it is not easily liquid. You cannot access your funds at any time before t’s the maturity date.
The major risk in CDs is the reinvestment risk. When interest rates fall, investors will earn less when they want to reinvest their capital plus interest in the new CDs it’ll be at lower rates. A counter risk can also be when the rates should increase, it won’t affect their funds because it is tied up.
3. Real estate
As long as the earth is still revolving, real estates are always going to be the best investments you can do long-term. Although you would need quite a sum of money to begin, its returns are usually high.
With real estate, you can get capital appreciation, rental income (if being used as a rental property) and substantial tax benefits from real estate. You can accept loans from banks to purchase a property and pay it over time as real estate is an attractive investment. Real estate investment is one of the best investments to hop on in 2020. It requires little attention except it is a rental property where you have to pay attention to it and be active in management.
As rewarding as real estate is, it has its perils. Its risk is that you have all your money tied up to one asset with no means of diversification. If anything happens, you would have to bear the cost from your pocket. In the case of rental property, if you cannot find a tenant you will also have to bear the cost of maintenance from your own pockets.
Also, there are numerous tax laws that favour owners of real estate properties. As long as you get a great property and manage it well, you will enjoy huge returns on your investment.
[Read also 10 mistakes to avoid as a first-time homebuyer]
4. Government bond funds
Government bond funds are mutual funds that invest in debt securities issued by the government. These funds are usually backed up by the government as a way to pay off debts and fund other projects.
However, government bonds are safe investments and are best suited for low-risk investors, beginner investors and anybody who is looking for cash flow.
The risk involved in these type of investment is; even though the funds invested in debt securities are backed up by the government, the fund itself is not. Therefore, it is affected by the inflation and fluctuation of interest rates.
In terms of liquidity, these funds are highly liquid, but their values vary depending on the interest rates.
5. Real Estate Investment Trusts (REITs)
Owning a real estate property might seem like a lot of work, especially if you have it’s a rental property. Real Estate Investment Trusts (REITs) are easier methods of owning an investment without the hassle of managing
Real estate investment trusts are companies that own and manage real estates. REITs are made up of several sub-sectors that investors can choose from and invest. Some of these sectors include; housing REITs, Commercial REITs, retail REITs, hotel REITs, etc.
It is also advisable to invest in publicly-traded REITs instead of private because it could be a safer investment. Also, look out for REITs that have a long history of steadily rising dividend as opposed to funds with the best interest capital.
6. Treasury Securities
Treasury Securities are government-issued debt securities used to praise money to pay off debts and fund project. They are deemed as safe investments options.
These types of investments are best for investors looking for high returns and safe investment. The funds invested in treasury securities cannot be accessed until it’s due maturity period. The maturity period varies depending on the type of treasury securities during your investment period. You will receive regular payments from the interest and your entire capital once it reaches its maturity date.
The three main types of treasury securities are:
- Treasury bills or T-bills: they have a maturity of one year or less and they are not interest bearing. The government can give you a discount of the face value but upon maturity, you will be paid the full market value.
- Treasury Notes or T-notes: they have a longer maturity rate of two – ten years. Investors are paid a fixed interest every six months and then market value upon maturity.
- Treasury bonds or T-bonds: they have a maturity of 20 years and 30 years. Investors are given an interest every six months and market value upon maturity. These securities are auctioned off throughout the year and its price and yield are determined at auction.
Although treasury securities are one of the safest investments because of the back up they have from the government, their values, fluctuates depending on whether the interest rates are high or low. They are also affected by inflation pressures.
Treasury securities are highly liquid, but the only way to access your money before its maturity is by selling off your bonds on the secondary market.
7. Dividend stock
A dividend is an amount a company pays its investors from the profit they generated that year. It could be paid yearly, bi-annually or quarterly.
Buying stocks are high-risk investments, but its returns are usually high along with the dividend paid. Dividend stocks are best for those looking for passive income-producing investment, long-term investments and young investors seeking to reinvest the money earned from the dividend.
It is best to invest with companies that have a solid history of dividend increase rather than the ones with the highest current yield. Reputable companies also experience mishaps.
You can sell your funds any day the market is open. It is also advisable to opt for long-term investments when it comes to dividend stock for the best possible returns.
8. Money market accounts
Just like savings accounts, they are one of the best and safest investments to do in 2020. The major difference is the option to write a certain number of checks every month. Although they come with a certain restriction, they are best for people looking for safe investments and want to save some cash or set up an emergency fund.
Money market accounts offer better returns than savings accounts and are more liquid. You can access your money with checks or debit cards. You can choose to have high-interest savings account with MMA, make sure you research on the companies with the best offers on MMA.
Final note
If you’re looking to start investing, do not put all your money in one basket. Diversify your wealth between low-risk investment such as CDs, MMA, high-risk investments, etc. and high-risk investments such as dividend-stocks, growth stocks etc.
To have a more secured financial future, start by paying your future self now and look into long-term investments.
