10 Best Long-Term Investments in March 2024 | Bank rate (2024)

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Brian Beers

Malcolm Ethridge

One of the best ways to secure your financial future is to invest, and one of the best ways to invest is for the long term. While it can be tempting to trade in and out of the market, taking a long-term approach is a proven strategy that many investors can benefit from. Bankrate has identified some of the best long-term investments to consider for your portfolio.

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2. Equity funds

Overview:An equity fund contains a collection of stocks, often united by a particular theme or category, such as U.S. stocks or large-cap stocks. The fund company charges a fee for this product, but this can be very low.

Who are they good for?:If you're not quite ready to spend the time and effort analyzing individual stocks, then a mutual fund –an ETF or an investment fund– could be a good option.

A mutual fund is an excellent choice for an investor who wants to be more aggressive in using stocks, but doesn't have the time or inclination to make investing a full-time hobby.

Risks:A mutual fund is less risky than buying individual positions and also less work.

But it can still move quite a bit in any given year, perhaps losing as much as 30 percent or even gaining 30 percent in some of the more extreme years.

If you buy a fund that is not broadly diversified, e.gfund based on one sector– keep in mind that your fund will be less diversified than a fund based on a broad index such as the S&P 500. So if you bought a fund based on the chemical industry, this could have a large exposure to oil prices to have. If oil prices rise, it is likely that many stocks in the fund will be affected.

Rewards:It will be less work to own and track a stock fund than individual stocks, but because you own multiple companies (and not all of them will excel in any given year), your returns should be more stable. With an equity fund you also have numerous potential advantages. Here are somebest index funds.

If you buy a broadly diversified fund such asor a Nasdaq-100 index fund – you get a lot of high-growth stocks, but also many others. But you want a diversified and safer set of companies than if you owned just a few individual stocks.

By buying a stock fund, you get the weighted average return of all the companies in the fund, which means the fund will be less volatile overall than if you held just a few stocks.

3. Bond funds

Overview:A bond fund – either as an investment fund orobligation ETF– contains many bonds from a number of different issuers. Bond funds are generally categorized by the type of bond in the fund: the bond's maturity, its risk, the issuer (corporate, municipal, or federal government), and other factors.

When a company or government issues a bond, it agrees to pay the bond owner a fixed amount each year. At the end of the bond's term, the issuer repays the bond's principal and the bond is redeemed.

Who are they good for?:Bond funds are good for investors who want a diversified portfolio of bonds without having to analyze and buy individual bonds.

They're also great for individual investors who don't have enough money to buy one bond, which typically costs around $1,000, and bond ETFs can often be purchased for less than $100.

Risks:Although bonds can fluctuate, a bond fund will remain relatively stable, although it may move in response to movements in prevailing interest rates.

Bonds are considered safe compared to stocks, but not all issuers are the same.

Public issuers, especially the federal government, are considered fairly safe, while corporate issuers' risk can range from slightly less to much riskier.

Rewards:A bond can be one of themsafer investments, and bonds become even safer as part of a fund. Because a fund can hold hundreds of types of bonds from many different issuers, it diversifies its investments and reduces the impact on the portfolio of bonds that default.

The return on a bond or bond fund is usually much lower than on an equity fund, perhaps 4 to 5 percent per year, but less on government bonds. It is also much less risky.

If you're looking for a bond fund, there are several fund choices to meet your needs.

4. Dividend stocks

Overview:While growth stocks are the sports cars of the stock world,dividend stocksare sedans – they can deliver solid returns, but are unlikely to soar higher as quickly as growth stocks.

A dividend stock is simply a stock that pays a dividend: a regular cash payment. Many stocks offer dividends, but these are mainly found in older, more mature companies that have less need for their cash.

Dividend stocks are popular with older investors because they produce regular income, and the best stocks grow that dividend over time, so you can earn more than the fixed payout of a bond.Real estate investment trusts (REITs) are a popular form of dividend stock.

Who are they good for?:Dividend stocks are good for long-term buy-and-hold investors, especially those who want less than average volatility and who enjoy or need a cash payout.

Risks:While dividend stocks tend to be less volatile than growth stocks, don't assume they won't rise and fall significantly, especially when the stock market is going through a rough patch.

However, a dividend-paying company is usually more mature and established than a growth company and is therefore generally considered safer.

That said, if a dividend-paying company doesn't earn enough to pay its dividend, it will cut the payout and the stock could fall as a result.

Rewards:The big appeal of a dividend stock is the payoutsome of the best companiespay 3 or 4 percent annually, sometimes more. But most importantly, they can increase their payouts by 8 or 10 percent per year for longer periods of time, so you typically get an increase every year. Best -called dividend aristocrats– have paid and increased their dividend annually for more than 25 consecutive years.

The returns here can be high, but will usually not be as high as with growth stocks. And if you prefer a dividend stock fund so you can own a diversified range of stocks,you'll find plenty available.

5. Store of value

Overview:When the market rises a lot, the valuation of many stocks is stretched. When that happens, many investors turn to value stocks as a way to be more defensive while still earning potentially attractive returns.

Value stocks are stocks that are cheapercertain valuation measurementslike aprice-earnings ratio, a measure of how much investors pay for each dollar of income.

Value stocks contrast with growth stocks, which tend to grow faster and whose valuations are higher.

Who are they good for?:Value stocks can be an attractive option because they tend to do well when interest rates rise. Their lower valuations tend to make them less volatile and also reduce their downside potential, making them a better option for risk-averse investors.

Risks:Value stocks tend to have less downside, so when the market falls, they tend to fall less. And if the market goes up, they can still go up.

Rewards:Value stocks can rise even faster than other non-value stocks if the market favors them again, driving their valuations higher. So the appeal of value stocks is that you can achieve above-average returns while taking less risk.

Many value stocks also pay dividends, so you can earn some extra returns there too.

6. Meal fund

Overview: Meal fundis a good option if you don't want to manage a portfolio yourself. These funds become more conservative as you age, so your portfolio is more secure as you approach retirement and need the money. These funds move your investments graduallymore aggressive stocks to more conservative bondswhen your target date approaches.

Where can you get them:Lunch boxes are a popular choice in many workplaces401(k) planer, although you can also purchase them outside of these plans. You choose your retirement year and the fund does the rest.

Risks:Mutual funds will carry many of the same risks as stock funds or bond funds, because they are really just a combination of the two. If your target date is still decades away, your fund will hold a higher proportion of stocks, meaning it will be more volatile initially. As your target date approaches, the fund will switch to bonds, meaning it will fluctuate less but also earn less.

As a target fund gradually moves toward more bonds over time, it will typically increasingly underperform the stock market. You sacrifice efficiency for safety.

Rewards:To avoid the risk of outliving your money, somefinancial advisorsrecommend that you buy a target fund five or ten years after your actual retirement so that you get the extra growth from stocks. Ultimately, it is what the fund invests in that determines your return. More stocks should correspond to higher long-term returns, while more bonds should correspond to lower long-term returns.

7. Real estate

Overview:In many ways, real estate is the prototypical long-term investment. It costs a lot of money to get started, the commissions are quite high, and the returns often come from holding an asset for a long time, and rarely over just a few years.

Real estate investmentcan be an attractive strategy, in part because you can borrow the bank's money for most of the investment and then pay it back over time.

Who are they good for?:For those who want to be their own boss, owning a property gives them that opportunity, and there are several tax laws that mainly benefit property owners.

That said, while real estate is often considered apassive investmentIf you rent out the property, you may have to do a lot of active management.

Risks:Every time you borrow significant amounts of money, you put extra emphasis on an investment performing well. But even if you buy real estate with cash, there's a lot of money tied up in one asset, and the lack of diversification can cause problems if something happens to the asset.

And even if you don't have a tenant for the home, you still have to pay the mortgage and other maintenance costs out of your own pocket.

Rewards:While the risk can be high, the reward can also be quite high. If you choose a good property and manage it well, you can earn your investment many times over if you are willing to hold onto the property over time.

And if youpay a mortgage on a propertyyou can enjoy greater stability and cash flow, making rental properties an attractive option for older investors. Here are 10 more tipspurchase of a rental property.

8. Small-capaandelen

Overview:Investor interest inthe small cap share– the shares of relatively small companies – can mainly be attributed to the fact that they have the potential to grow quickly or capitalize in an emerging market over time. In fact, retail giant Amazon started as a small-cap stock and made investors who held the stock very rich.

Small-cap stocks often are toohigh growth stocks, but not always.

Who are they good for?:Buying individual stocks takes a lot of work and analysis, but small caps can be a great place to find stocks that other investors have missed.

But these small companies tend to be much more volatile than larger, established companies, so investors need to have an iron stomach.

Risks:Like high-growth stocks, small-cap stocks tend to be riskier. Small companies tend to be riskier because they have fewer financial resources, less access to capital markets, and less power in their markets (less brand recognition, for example).

Like growth stocks, investors will often pay a lot for the gains of small-cap stocks, especially if they have the potential to one day grow or become a leading company. And this high price of a company means that small-cap stocks can drop quickly over timea difficult spot on the market.

Small-cap companies can be quite volatile and fluctuate dramatically from year to year. In addition to the price movement, the company is generally less established than a larger company and has fewer financial resources. Thus, small-caps are considered to carry more business risks than mid-caps and large-caps.

If you're going to buy individual companies, you need to be able to analyze them, and that takes time and effort. So buying small businesses is not for everyone. (You can also consider some of thesebeste small-cap ETF's.)

Rewards:The rewards for finding a successful small-cap stock are enormous, and you can easily earn annual returns of 20 percent or more for decades if you can buy a true hidden gem like Amazon before anyone really sees how successful it can ultimately become.

9. Robo-adviseurportfolio

Overview:Immediatelyrobo-advisoryou simply deposit money into the robo account and it will automatically invest it based on your goals, time horizon andrisk tolerance. You fill out a number of questionnaires when you start so that the robo-advisor understands what you need from the service, and then manages the entire process. The robo-advisor selects funds, usually low-cost ETFs, and builds a portfolio for you.

Your costs for the service? Administration fees charged by the robo-advisor, often around 0.25 percent per year, plus the cost of any money in the account. Mutual funds charge fees based on how much you invest with them, but funds in robo accounts typically cost about 0.06 percent to 0.15 percent, or $6 to $15 per share per year. $10,000 invested.

At its best, a robo-advisor can build you a broadly diversified investment portfolio that can meet your long-term needs.

Who are they good for?:Robo-advisors are another good alternative if you don't want to invest much yourself and prefer to leave it all to an experienced professional.

With a robo-advisor, you can set the account as aggressively or conservatively as you want. If you always want to own all the shares, you can go that route. If you want the account to be primarily cash or a simple savings account, two of the leading robo-advisors are:The prosperity frontInImprovement– Offer that option too.

Risks:The risk of a robo-advisor depends greatly on your investments. If you buy a lot of stock funds because you have a high risk tolerance, you can expect more volatility than if you buy bonds or have cash in a savings account. So the risk lies in what you own.

Rewards:The potential reward in a robo-advisor account also varies based on the investments and can range from very high if you mainly own stock funds, to low if you have safer assets such as cash in asavings account with high returns.

A robo-advisor will often build a diversified portfolio so that you have a more stable range of annual returns, but this comes at the cost of a somewhat lower total return.

10. Roth IRA

Overview:INRoth IRAmay be the best retirement account available. This allows you to save after-tax money, let your money grow tax-free for decades, and then withdraw it tax-free. Moreover, you can pass the money on to your heirs tax-free, making it an attractive alternativetraditional IRA.

Who are they good for?:A Roth IRA is a great tool for anyone earning income to accumulate tax-free assets for his or her retirement.

Risks:A Roth IRA is not an investment, but rather a wrapper around your account that provides it with special tax and legal benefits. So if you have your account on one of thesebest brokerage for roth iras, you can invest in almost anything that suits your needs.

If you are risk averse and want a guaranteed income with no chance of loss, aIRA CDis a good option. This investment is just a CD in an IRA.

And within a tax-efficient IRA, you avoid taxes on the interest you accrue, as long as you follow the plan's rules.

There is virtually no risk of not receiving your payout and principal when the CD matures. It is about as safe as an investment, although you have to watch out for inflation.

Rewards:If you want to go a step further, you can invest in shares and mutual funds and take advantage of their potentially much higher returns – all tax-free.

Of course, you must tolerate the higher risks of investing in stocks and mutual funds.

Essential rules for long-term investments

Long-term investing can be your path to a secure future. But it's important to keep these rules in mind along the way.

Understand the risks of your investments

To achieve higher returns, investing generally requires you to take on more risk. So very safe investments like CDs tend to have low returns, while medium-risk assets like bonds have slightly higher returns, and high-risk stocks still have higher returns. Investors who want to achieve a higher return will usually have to take a higher risk.

While stocks as a whole have a strong track record - thehave achieved 10 percent returns over long periods of time – stocks are known for their volatility. It is not unusual for a stock to experience a 50 percent increase in price within one year, both up and down. (Some of the best short-term investments are much safer.)

Choose a strategy you can stick with

Can you withstand a higher level of risk to achieve higher returns? It's important to know your risk tolerance and whether you'll panic if your investments fall. You want to avoid at all costs selling an investment when it has fallen, if it still has the potential to rise. It can be demoralizing to sell an investment and then watch it rise even further.

Make sure you understand your investment strategy so you have a better chance of sticking with it if it falls out of favor. No investment approach works 100 percent of the time, so it's important to focus on the long term and stick to your plan.

Know your time horizon

One way you can actually reduce your risk is by holding your investments longer. The longer holding period gives you more time to weather the ups and downs of the market.

While the S&P 500 index has an excellent track record, these returns were built over time, and over a short period of time the index can drop significantly. Investors who put money into the market should therefore be able to keep it there for at least three to five years, and the longer the better. If you can't,the short-term investmentsuch as a high-yield savings account may be a better option.

So you can use time as a great ally in your investment. Also valuable for those committed to investing for the long term, you don't have to spend all your time monitoring your investments and worrying about short-term moves. You can create a long-term plan and then put it (mostly) on autopilot.

Make sure your investments are diversified

As mentioned above, no investment strategy works all the time. That's why it is soimportant to be diversifiedI am an investor.

Index funds are a great low-cost way to easily achieve diversification. This allows you to invest in a large number of companies grouped by things like size or geography. By owning a number of these types of funds, you can build a diversified portfolio in no time.

It may seem exciting to put all your money into one or two stocks, but a diversified portfolio carries less risk and should still deliver solid returns in the long run.

banktarievenBrian Bakeralso contributed to an update to this story.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.