12 Best Investments in 2023 — Part 3

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. In the part 2 weeks, we discussed, high-yield savings accounts, certificates of deposit, money market funds, government bonds, corporate bonds, mutual funds, index funds and exchange-traded funds. Here are a few more.

9. Dividend stocks

Dividend stocks can provide the fixed income of bonds as well as the growth of individual stocks and stock funds. Dividends are regular cash payments companies pay to shareholders and are often associated with stable, profitable companies. While share prices of some dividend stocks may not rise as high or quickly as growth-stage companies, they can be attractive to investors because of the dividends and stability they provide. Keep in mind: dividends in taxable brokerage accounts are taxable the year dividends occur. Whereas stocks (that do not pay dividends) are primarily taxed when the stock is sold.

Best for: Any investor, from first-timer to retiree, though there are specific types of dividend stocks that may be better depending on where you are in your investing journey. Young investors, for example, may do well to look into dividend growers, which are companies with a strong track record of consecutively increasing their dividends. These companies may not have high yields currently, but if their dividend growth keeps up, they could in the future. Over a long enough time frame, this (combined with a dividend reinvestment plan) can lead to returns that mirror those of growth stocks that don’t pay dividends.

Older investors looking for more stability or fixed income could consider stocks that pay consistent dividends. On a shorter timeline, reinvesting these dividends may not be the goal. Rather, taking the dividends as cash could be a part of a fixed-income investing plan.

Where to buy dividend stocks: Similar to others on this list, the easiest way to buy dividend stocks is through an online broker.

10. Individual stocks

A stock represents a share of ownership in a company. Stocks offer the biggest potential return on your investment while exposing your money to the highest level of volatility.  These cautionary words aren’t meant to scare you away from stocks. Rather, they’re meant to guide you toward the diversification that buying a collection of stocks through mutual funds provides, as opposed to buying individually.

Best for: Investors with a well-diversified portfolio who are willing to take on a little more risk. Due to the volatility of individual stocks, a good rule of thumb for investors is to limit their individual stock holdings to 10% or less of their overall portfolio.

Where to buy stocks: An easy way to buy stocks is through an online broker. Once you set up and fund a brokerage account, you’ll choose your order type and become a bona fide shareholder.

11. Alternative investments

If you’re not investing in the stock, bond or cash equivalent instruments listed above, there’s a good chance your investment is part of the alternative assets class. This includes gold and silver, private equity, hedge funds, cryptocurrencies like Bitcoin and Ethereum, and even coins, stamps, alcohol and art.

Best for: Investors (accredited investors, in many cases) who want to diversify away from traditional investments and hedge against stock and bond market downturns.

Where to buy alternative investments: While some online brokers will offer access to certain alternative investments, other alternatives are available only through private wealth management firms. However, there are ETFs — such as oil, gold and private equity ETFs — that track the asset itself, as well as companies related to the asset (such as gold mining and refining companies).

12. Real estate

Traditional real estate investing involves buying a property and selling it later for a profit, or owning property and collecting rent as a form of fixed income. But there are several other, far more hands-off ways to invest in real estate.  One common way is through real estate investment trusts, or REITs. These are companies that own income-generating properties (think malls, hotels, offices, etc.) and offer regular dividend payments. Real estate crowdfunding platforms, which often pool investors’ money to invest in real estate projects, have also risen in popularity in recent years.

Best for: Investors who already have a healthy investment portfolio and are looking for further diversification, or are willing to take more risk for higher returns. Real estate investments are highly illiquid, so investors shouldn’t put into an investment any money they may need to access quickly.

How to invest in real estate: Some REITs can be purchased on the public stock market through an online stockbroker, while others are only available in private markets. Similarly, some crowdfunding platforms are open to accredited investors only, while others don’t put restrictions on who can invest.

How to choose the right investments in 2023

Building wealth through the investments outlined above can start at any age and at any income level. The key is to choose the right investments for you based on the following considerations: 

• Your timeline. Money earmarked for near-term needs should be easily accessible and in a safe and stable investment. For long-term goals, you have more leeway to invest in more volatile assets.
  
  
• Your risk tolerance. The more risk you’re willing to take by exposing your money to the short-term swings of the stock market, the higher the long-term potential payoff. Spreading your money across different types of investments can help smooth out your investment returns.
  
  
• How much money you have. Some investments have minimum balance or initial investment requirements. But there are workarounds and providers that can accommodate most investment budgets if you know where to look.
  
  
• How much help you need. DIY investors can access many of the investments outlined above by opening a brokerage account. If you’re not sure which investments are best for your situation, you can hire a low-cost, automated service called a robo-advisor to build an investment portfolio for you based on the criteria above. Some short-term investments, such as savings accounts, can be opened at a bank or credit union.

(Partially reprinted. from nerdwallet.com)