As has been demonstrated, a seemingly stable economy can be quickly turned on its head, leaving those who weren’t prepared for tough times scrambling for income.
But with the economy struggling through a bout of high inflation, what are the best investments for investors to make this year? One idea is to have a mix of safer investments and riskier, higher-return ones.
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High-yield savings accounts
Best investment for
A high-yield savings account works well for risk-averse investors, especially for those who need money in the short term and want to avoid the risk that they won’t get their money back.
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Short-term certificates of deposit
Best investment for
A CD works well for risk-averse investors, especially those who need money at a specific time and can tie up their cash in exchange for a bit more yield than they’d find on a savings account.
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Short-term government bond funds
Best investment for
Government bond funds may work well for risk-averse investors, though some types of funds (like long-term bond funds) may fluctuate a lot more than short-term funds due to changes in the interest rate.
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Series I bonds
Best investment for
Like other government-issued debt, Series I bond are attractive for risk-averse investors who do not want to run any risk of default. These bonds are also a good option for investors who want to protect their investment against inflation. However, investors are limited to buying $10,000 in any single calendar year, though you can apply up to an additional $5,000 in your annual tax refund to the purchase of Series I bonds, too.
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Short-term corporate bond funds
Best investment for
Short-term corporate bond funds can be good for risk-averse investors who want a bit more yield than government bond funds.
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S&P 500 index funds
Best investment for
An S&P 500 index fund is a good choice for any stock investor looking for a diversified investment and who can stay invested for at least three to five years.
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Dividend stock funds
Best investment for
Dividend stock funds are a good selection for almost any kind of stock investor but can be better for those who are looking for income. Those who need income and can stay invested for longer periods may find these attractive.
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Value stock funds
Best investment for
Value stock funds are good for investors who are comfortable with the volatility associated with investing in stocks. Investors in stock funds need to have a longer-term investing horizon, too, at least three to five years to ride out any bumps in the market.
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Nasdaq-100 index funds
Best investment for
A Nasdaq-100 index fund is a good selection for stock investors looking for growth and willing to deal with significant volatility. Investors should be able to commit to holding it for at least three to five years. Using dollar-cost-averaging to buy into an index fund trading at all-time highs can help reduce your risk, compared to buying in with a lump sum.
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Rental housing
Best investment for
Rental housing is a good investment for long-term investors who want to manage their properties and generate regular cash flow.
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Cryptocurrency
Best investment for
Cryptocurrency is good for risk-seeking investors who wouldn’t mind if their investment goes to zero in exchange for the potential of much higher returns. It’s not a good choice for risk-averse investors or those who need any kind of safe investment.
