Investors looking to invest long-term need to buy and hold assets for years or even decades. Determining which long-term investments best suit you will ultimately depend on your risk tolerance and financial goals.
To help you decide, here are a few long-term investment options you can consider.
Stocks
Stocks are perhaps the top choice for investing long term. With stocks, there are several investment options. You can bet on individual stocks, or you can choose equity index funds and exchange-traded funds (ETFs), which many investors usually go for.
Stock-focused funds, such as the S&P 500 index fund, allow you to own small portions of different stocks simultaneously. Plus, your portfolio gets the fund's diversification benefit, reducing the risk of any investment that is making you lose money.
Another long-term investments under stocks are growth funds which are ETFs or mutual funds that invest in growth stocks.
Instead of dividend-paying companies, growth funds focus on companies with excellent earnings or revenue growth. That means growth funds generate returns for investors through quick price appreciation.
On the other hand, value funds invest in companies considered undervalued in price based on fundamental factors.
Value funds can provide stability to your portfolio since they focus on steadier, well-established firms with long records of paying consistent dividends, despite the possibility that their future growth could slow down.
Growth funds tend to perform well when interest rates are low, and economies are expanding. Meanwhile, value funds have proven to do well when the economy is shrinking, and the funds utilized by growth companies to support their development have run out.
Cryptocurrencies
Investors willing to take the risk can consider holding some crypto investments for the long term. However, that approach may seem unideal, knowing that cryptocurrencies have only been present for more than ten years and are highly volatile.
Still, there are certain cryptocurrencies that you can buy and hold for long periods. You can put money into a few individual coins, or you can consider other options to enter the crypto market.
That said, you always need to practice caution when investing in cryptocurrencies because not only are they very volatile, their value is also unproven. Therefore, a good move you can do is to put only a small portion of your investment dollars into these digital assets.
Bonds
Bonds are another long-term investment option to consider, especially if you want something less risky than stocks and stock-focused funds. Indeed, bonds are less risky as they provide a steady flow of income and holders the right to receive payment before stockholders if the company goes bankrupt.
Government bonds tend to be the safest ones, while company bonds can be classified into low-risk, high-quality, and junk bonds with attractive interest rates and a high risk of default.
Many choose bond funds over individual bonds, as these bonds can be pretty difficult to purchase, and individual investors need to have some diversification.
Moreover, the income from bonds is relatively small at the moment, with the current interest rates being considerably low. Several investors expect interest rates to climb soon, which is likely to cause numerous bonds to drop in value.
Nevertheless, excellent long-term bonds can still offer income for investors while dealing with less volatility than stocks. Some of the excellent long-term bonds funds include bonds funds and ETFs, and government bonds, such as Treasury inflation-protected securities (TIPS) and I bonds.
