Simply put, there is a lot to know and a lot to learn about investing. There are dozens of different kinds of investment vehicles and countless options among those for investing your money. Before you start putting your hard-earned money away, it’s best that you understand the basics of where it’s going and your best options for investing in 2016.
The Principles of Investing
Before looking at specific types of investments, let’s review some of the basics of investing. The very, very simple summary is that you give away some money, wait, and receive more money back after a certain time.
It’s also helpful to understand what investing is not. For one, it’s not a way to make money overnight (in most cases). It’s not something to put all of your eggs in–all investments involve a degree of risk. And it’s not something worth putting money into if you have high-interest debt obligations to pay off because the chances are you’ll just end up accumulating more debt than returns on your investments.
That said, if you’re able, the sooner you invest, the better. It’s a snowball effect: The sooner that you put your money into something that will make you money, the sooner you make that money, which you can put back into investing. Rinse and repeat. The best time to invest was yesterday, and the second-best time to invest is now.
Finally, you’ll want a diverse portfolio. That is, it’s best if your investments are split among different vehicles. If you’re all set to invest, make sure you have the following investments in your portfolio this year.
If you’re just starting out, mutual funds are the best way to grow your money. While it will take some time to see a return on this investment, they’re low-risk and almost a guaranteed profit. A mutual fund works by pooling together money from multiple investors who share a common goal and investing the money accordingly. Here are the best mutual funds you can invest in in 2016:
- Vanguard 500 Index Fund: Based on the S&P 500, this fund has had its slight ups and downs. But taking a longer-term look at the fund shows its almost doubled in value over the past five years, and it looks to continue to grow. It’s basically a guaranteed profit.
- Vanguard Health Care: This fund is split among different health sectors such as biotech and healthcare technology. While Vanguard labels this fund as high risk and high reward, an aging Baby Boomer population is going to put these services in high demand.
A stock is a portion of a company that you buy into, and as the company does well, demand for the stock rises, meaning your stock increases in value. The best stock investments you can make are in companies you expect to continue to do well. But, if you want to make a greater profit (with a higher degree of risk), you’d do better to choose companies that you expect to grow in the future. Here are your best stock investments for 2016:
- Apple (AAPL): Of course, the best time to buy Apple was years ago. But don’t be fooled: this is still a good stock. The past year has seen the stock fall, meaning that it’s cheaper than it has been in two years. With a broadening ecosystem and a new headquarters, there’s no doubt that Apple’s stock will rise again.
- Tesla (TSLA): The electric car company basically has the rapidly-growing industry cornered and is set to release its first consumer electric car next year. It’s a disruptor on the ground floor, just like Apple (AAPL) was, and it’s just announced its iPhone.
Commodities are fairly easier to understand, as their value comes from physical objects. Better yet, they’re always in demand. Unlike a stock, you never have to worry about a commodity going out of business or making bad press. Here are three of the best commodity investments you can make:
- Alternative energies: If you’re interested in short-term investments, you might look instead at investing in crude oil. But taking a long-term view of energy shows that green and renewable energies like solar, nuclear, and natural gases are the way of the future. Their demand will increase this decade, and surely in the decades following.
- Lithium: This precious metal isn’t as popular as gold, silver, or copper, but it’s due for a huge surge in demand, as it’s one of the main materials used in batteries. With a car industry that will see a greater reliance on batteries in the future, lithium will be coming out on top.
In simple terms, your investment comes in the form of buying a property, such as a house, an apartment, or a condo. While you’re responsible for paying the mortgage on this property, as well as for its upkeep and repairs, you can make money by renting out the property, or by “flipping” it by making renovations and selling it for more than you paid.
Your safest investment would be to buy a property that’s in an area of high-demand. With that in mind, consider these options for 2016:
- College apartments and houses: There’s always an influx of students every year, and with tuition rising, across the board, more students will be looking for cheaper off-campus rentals than living in a dorm.
- Real estate in trending cities: Homes in cities such as Detroit, which is on the verge of economic recovery, and Austin, which constantly ranks as an increasingly popular city for millennials, will no doubt be in higher demand in the coming future.
These are just a few of your investment options, but you would certainly do worse putting your money elsewhere. Look at these investments as opportunities to learn more about how investments work, and soon enough, you’ll be on to more complex (and hopefully higher earning) investments.
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