Investing can be an effective way to grow your money over time, but it should be done responsibly. As you consider your options, it’s important to remember that there’s no one right way to invest. What one person chooses to invest in could be different from what someone else does. Even the results can differ based on various factors like market volatility.
So, then, how do you know where to put your time and money?
“When answering this question, it’s important to note that investment outcomes can vary significantly based on factors such as market conditions, individual risk tolerance, and investment expertise,” said Sigita Kotlere, CEO at Nectaro.
Before investing in anything, think about your own circumstances, income, goals and risk tolerance. Once you’ve done that, you can start investing in things that best suit you. With that in mind, here are the top investments to consider — each with their own level of risk and potential returns — if you want to make money.
When it comes to real estate investing, you have several options. If you want to go the more traditional route, you can purchase property and sell it at a higher price a few months or years later. Or you can invest in rental properties and make a profit that way.
“In real estate, you benefit from rental leases aside from the capital growth of the property,” said Raymond Quisumbing, a registered financial planner at Bizreport.com.
Every month that you have a tenant is another month that you can generate additional income — while paying down your mortgage (if you have one). This can also be a great way of adding to your retirement income later.
If you want a less hands-on approach to investing, consider real estate investment funds (REITs). REITs are companies that already own properties — like hotels or malls — and pay out in dividends.
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Startups or Venture Capital
Many startups need investors to help them grow, which is where venture capital comes in. Venture capital is essentially money or resources invested in a small or new business that has solid growth potential but needs more funding to succeed. In return for the initial investment, the investor typically receives some kind of equity or ownership in the business.
“Investing in early-stage startups or venture capital funds can be high-risk but also offer the potential for significant returns if you can identify promising companies with disruptive ideas and strong growth prospects,” said Kotlere.
Growth stocks are essentially company shares that are expected to grow more quickly than what’s considered average in the current market. While growth stocks typically don’t pay dividends, investors can earn money via capital gains when they sell their shares down the line.
“Investing in high-growth companies with strong fundamentals and promising future prospects can lead to significant returns,” said Kotlere. “However, it’s important to thoroughly research and understand the underlying business, industry trends, and potential risks associated with individual stocks or projects.”
Index Funds or Exchange-Traded Funds (ETFs)
If you’re looking for a long-term investment with minimal upfront fees, index funds — a type of mutual fund — or exchange-traded funds are good options to consider. Both options help diversify your portfolio and are considered to be relatively low risk.
“Investing should be boring; I know [it’s] not what anyone wants to hear, especially from a financial planner!” said Jen Reid, a financial planner and founder of BASE Financial Planning. “The best things to invest in are going to be mutual funds and ETFs — tracking the market and getting average returns. The value add will be the time in the market and letting compound interest go to work.”
Peer-to-Peer (P2P) Lending Platforms
As an investor on a peer-to-peer lending platform, you can lend money to individuals or businesses and help them achieve their goals. In exchange, you can charge interest on any loans and potentially end up with a higher-than-average return on your investment.
P2P lending isn’t for everyone, though. You’ll need to have a high risk tolerance, for one thing. You’ll also need to carefully vet the platform and prospective borrower before agreeing to work with them.
“Compared to traditional fixed-income investments, P2P lending platforms often offer the potential for higher returns,” said Kotlere. “I would like to emphasize the importance of investors paying attention to the licensing status of a platform, as well as the jurisdiction from which the license is obtained. These factors significantly impact the long-term security of investments.”
One way to mitigate the risk of P2P lending is to diversify your portfolio. Also, only lend as much as you’re willing to lose.
A corporate bond is essentially a loan you make to a business entity. In exchange for funds, that company agrees to pay interest on the loaned amount. They also typically agree to pay back the principal amount when the bond matures.
Corporate bonds can be risky, especially when compared to other options like government bonds. However, they could also generate high yields.
“Building a well-diversified portfolio can help mitigate risks and increase the potential for long-term growth,” said Kotlere. “By spreading investments across various asset classes such as stocks, bonds, real estate, P2P, crypto, and commodities, you can potentially benefit from different market trends.”
Financial Coach and CPA
While the returns might feel a little less tangible at first, working with a financial coach and a Certified Public Accountant (CPA) could be worthwhile as you build toward long-term wealth.
With a financial coach, for instance, you can learn the best investing methods, as well as the best things to invest in based on your needs and goals. “Investing in a financial coach will teach you how and what to invest in, instead of a financial advisor that will just do it for you,” said Reid. “I recommend working with a financial coach that will help you feel empowered and listen to your questions!”
With a CPA, you can get both financial and investment guidance. “An overlooked, but obvious place to invest is in a great CPA; you will want a CPA that makes sure that you are taking advantage of all the tax codes,” added Reid. “You could be saving a lot of money and putting it towards other investments if you work with a CPA who is well aware of your tax situation and tax codes.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Planning Expert: 8 Things You Should Invest Money in if You Want To Be Rich