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Whether you use a traditional financial advisor, a robo-advisor or do all your investing yourself, there are multiple ways to invest your hard-earned cash. Numerous platforms, including brokerage firms like Charles Schwab, Fidelity and Vanguard, allow you to oversee your portfolio and make trades in real time. You can even invest using any number of mobile apps, which is crucial if you do all your investing normally.
But investing for long-term growth is very different from day trading, and the investments you choose must reflect your extended timeline. For example, your investment choices should be different if you are investing with a 20-year or 30-year timeline than if you need cash next year.
With that in mind, we reached out to some financial advisors to find out their favorite long-term investments that help build wealth over time. Whether you’re dollar-cost averaging or throwing in lump sums whenever possible, here are six investment options that will help you build lasting wealth.
Anna Rathbun, who serves as chief investment officer of CBIZ Investment Advisory Services, says the stock market is a good bet for long-term growth since, historically, it has always gone up over time. But not all stocks are created equal, she says, adding that some are more growth-oriented in style and others are more defensive in nature.
To help diversify as much as possible, Rathbun recommends investing in index funds that provide exposure to a broad market, such as the S&P 500. “Indexing is also a low-cost option for fee-sensitive investors,” she says, which is important. since long-term investors don’t want to be eaten up by fees.
However, Rathbun says that investing in equity markets means you will need to be able to withstand short-term volatility, and it is important not to react to temporary shocks.
Mel J. Casey, senior portfolio manager at FBB Capital Partners, suggests that investing in passive funds such as ETFs is another winning strategy for building long-term wealth.
ETFs have grown in popularity since they allow investors to gain essential exposure to an area of ​​the market quickly and efficiently. ETFs also provide attractive diversification with low ongoing costs, which is another major advantage for long-term investors looking to maximize returns.
Best of all, ETFs are easy to buy with any number of brokerage firms, whether you’re investing within a retirement account like a traditional IRA or Roth or in a separate brokerage account.
Real estate is another type of investment that can pay off in spades over time. This is especially true if you have the desire and time to be a landlord, and if you can get renters to help you pay off your property over 20 or 30 years. Then when you own your rentals outright, the income they generate can be a big help to your retirement.
However, not everyone wants to be a landlord, which is why Rathbun recommends investing in Real Estate Investment Trusts, or REITs. REITs allow investors to bet on real estate without having to manage individual properties.
“REITs may not provide the kind of growth that investors might find in technology stocks, but a higher yield profile and tax-friendly characteristics make REITs attractive to income-oriented investors,” says Rathbun .
Casey of FBB Capital Partners also says that investing in individual companies can be a winning strategy, especially since you can choose companies that align with your personal style or values. However, not everyone has the desire or risk tolerance to invest in individual stocks for the long term, in which case they should hire an investment advisor to professionally manage their assets for them.
Financial planner Dallin Cutler of EP Wealth Advisors also says that the key to long-term stock investments is to make peace with the volatility that this strategy brings.
“If you are invested for the long term, just accept this probability and don’t look at your account when we have an extended decline in the market,” he says. “Stay disciplined and let those stocks grow in long-term value.”
Crypto has been particularly volatile over the past year, and while financial experts don’t always agree on whether crypto should be part of a long-term investment portfolio, some say those with a healthy risk tolerance should consider it. Financial advisor Daren Blonski of Sonoma Wealth Advisors is one such advisor, though he advises against betting the farm on this type of digital asset.
“Having a small allocation to bitcoin is a good long-term strategy to grow your money over time,” he says. Alternatively, you can also consider putting your money into an investment trust such as Grayscale Bitcoin Trust (GBTC), which offers the opportunity to gain exposure to bitcoin through a traditional investment vehicle.
That being said, investors interested in using crypto to build long-term wealth must carefully weigh the pros and cons of owning the public and private keys of their own bitcoin before investing. they invest. After all, bitcoin and other digital assets require a different level of safety and security than other types of investments.
“Consumers need to be well educated and take the time to do the necessary research or hire someone knowledgeable and experienced in this area to help them,” says Blonski.
Finally, never forget with you they are also an asset that can help build wealth over time. Financial adviser Christopher Clepp of Building Towards Wealth says that investing in your own personal and professional growth often doesn’t pay off better.
Clepp gives examples such as going back to school for a certificate or additional degree, starting a business or strategically expanding an existing business. Other ways to invest in yourself include taking online courses or joining a mastermind group. Even taking the time to learn more about personal finance and investing can also yield great results.
Whichever path you choose, investing in yourself can pay off handsomely at any point in your career. Clepp says this is especially true for people who invest in their own startups.
“If you manage the risks of your business and maximize the benefits of business ownership, you can make work optional at an earlier age,” he says.
When looking for the best ways to invest for the long term, there are plenty of important things to consider. This includes taxes and fees, both of which can make your investments less efficient and deplete your returns over time.
Casey suggests that funds dedicated to retirement should be invested in tax-advantaged accounts such as IRAs and 401(k)s since they offer significant advantages in terms of tax-free compounding over long periods.
Also, investors should carefully examine any fees associated with the investments they are considering, whether they want to invest in REITs or mutual funds. Fee-averse investors can also look for options that are not actively managed, such as index funds and many ETFs.
Finally, remember that high yield investments always involve higher risk, and should take your time horizon and risk tolerance into account. In that respect, Clepp says investors should think of their long-term investments like a ship.
“The ship is built to weather the storms,” ​​he says. “If your first inclination is to abandon ship when the financial storm hits and there will always be another storm, you probably have the wrong investment for you.”
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