12 Best Investments in 2023 — Part 2

The term “investing” may conjure images of the frenetic New York Stock Exchange, or perhaps you think it’s something only meant for those wealthier, older or further along in their careers than you. But this couldn’t be further from the truth. When done responsibly, investing is a great way to grow your money. And many types of investments are accessible to virtually anyone regardless of age, income or career. Such factors will, however, influence which investments are best for you at this particular moment.

For example, someone close to retirement with a healthy nest egg will likely have a very different investment plan than someone just starting out in their career with no savings. Neither of these individuals should avoid investing; they should just choose the best investments for their individual circumstances.

 We are looking at the 12 of the best investments for consideration. Last week, we discussed, high-yield savings accounts, certificates of deposit, money market funds, and government bonds. Here are a few more.

 5. Corporate bonds

Corporate bonds operate in the same way as government bonds, only you’re making a loan to a company, not a government. As such, these loans are not backed by the government, making them a riskier option. And if it’s a high-yield bond (sometimes known as a junk bond), these can actually be substantially riskier, taking on a risk/return profile that more resembles stocks than bonds.

Best for: Investors looking for a fixed-income security with potentially higher yields than government bonds, and willing to take on a bit more risk in return. In corporate bonds, the higher the likelihood the company will go out of business, the higher the yield. Conversely, bonds issued by large, stable companies will typically have a lower yield. It’s up to the investor to find the risk/return balance that works for them.

Where to buy corporate bonds: Similar to government bonds, you can buy corporate bond funds or individual bonds through an investment broker.

6. Mutual funds

A mutual fund pools cash from investors to buy stocks, bonds or other assets. Mutual funds offer investors an inexpensive way to diversify — spreading their money across multiple investments — to hedge against any single investment’s losses.

Best for: If you’re saving for retirement or another long-term goal, mutual funds are a convenient way to get exposure to the stock market’s superior investment returns without having to purchase and manage a portfolio of individual stocks. Some funds limit the scope of their investments to companies that fit certain criteria, such as technology companies in the biotech industry or corporations that pay high dividends. That allows you to focus on certain investing niches.

Where to buy mutual funds: Mutual funds are available directly from the companies that manage them, as well as through discount brokerage firms. Almost all of the mutual fund providers we review offer no-transaction-fee mutual funds (which means no commissions) as well as tools to help you pick funds. Be aware that mutual funds typically require a minimum initial investment of anywhere from $500 to thousands of dollars, although some providers will waive the minimum if you agree to set up automatic monthly investments.

7. Index funds

An index fund is a type of mutual fund that holds the stocks in a particular market index (e.g., the S&P 500 or the Dow Jones Industrial Average). The aim is to provide investment returns equal to the underlying index’s performance, as opposed to an actively managed mutual fund that pays a professional to curate a fund’s holdings.

Best for: Index mutual funds are some of the best investments available for long-term savings goals. In addition to being more cost-effective due to lower fund management fees, index mutual funds are less volatile than actively managed funds that try to beat the market.  Index funds can be especially well-suited for young investors with a long timeline, who can allocate more of their portfolio toward higher-returning stock funds than more conservative investments, such as bonds.  Young investors who can emotionally weather the market’s ups and downs could even do well to invest their entire portfolio in stock funds in the early stages, Fernandez says.

Where to buy index funds: Index funds are available directly from fund providers or through a discount broker.

8. Exchange-traded funds

Exchange-traded funds, or ETFs, are like mutual funds in that they pool investor money to buy a collection of securities, providing a single diversified investment. The difference is how they are sold: Investors buy shares of ETFs just like they would buy shares of an individual stock.

Best for: Like index funds and mutual funds, ETFs are a good investment if you have a long time horizon. Beyond that, ETFs are ideal for investors who don’t have enough money to meet the minimum investment requirements for a mutual fund because an ETF share price may be lower than a mutual fund minimum.

Where to buy ETFs: ETFs have ticker symbols like stocks and are available through brokerages. Robo-advisors also use ETFs to construct client portfolios.

Next week, we will discuss Dividend stocks, individual stocks, alternative investments, and real estate.