Get-rich-quick schemes are always tempting, at least on the surface. Who doesn’t want to win the lottery? You would never have to worry about finances again. However, in reality most financial advisors steer their clients towards long-term investments that will increase slowly but steadily over the years.
What are the advantages to looking at the long term? One is that long-term investments have a proven track record. For instance, investors who choose a few high-quality stocks issued by large companies that have been in business for years, if not decades, see the value of their portfolio grow over the years. Another plus is that looking at investments with a long lens tends to remove any emotion and allows you to look at your investments as a business decision. When a slight blip occurs in the stock or housing markets, you can simply ride it out if you’re committed to a 20- or 30-year outlook.
Some investments perform better than others in the long term. Look over our suggestions and compare them with your current portfolio. Then, you can determine which of these might make the best long term investments for you and your financial situation.
Real estate has long been considered an excellent long-term investment. Property values generally rise over a period of years or decades, giving a good return on the initial investment. Various types of properties could include vacant land, your own home, or homes purchased to develop as rental properties. While some owners of this latter type of property prefer to manage the rental aspect themselves, turnkey real estate investments are growing in popularity with investors of all ages. Rather than having to repair or refurbish a newly purchased property before it is ready for tenants, a turnkey property is ready for rental and often includes tenants already living in the home. Many turnkey investment companies also offer the advantage of hands-on management, leaving you free to pursue other activities.
Blue-chip stocks are the most solid and least risky of stock investments. These stocks are issued by companies that are financially sound and predicted to remain so. Historically, such stocks tend to perform well over the long term.
Many investors like the security of the bond market, which is far less volatile than stocks. In addition, some bonds have the advantage of increased yields if you keep them for 10 years or longer.
Index funds are made up of high-quality stocks chosen to represent those that are included in an index, such as the Standard & Poor’s 500 index. These funds consist of stocks from a variety of companies and industries, so they are less vulnerable to market fluctuations than the individual stocks.
These plans, also known by the acronym DRIP, do just what the name implies: They reinvest dividends earned by your investments back into the stock or fund, compounding the value of your portfolio. In other words, not only is the base value of the stocks increasing, but your dividend reinvestment mean you are purchasing more stocks or fund shares that will also increase in value over time.
These are just a few of the best investments suited for a long-term plan. Some investors find that gold, works of art, or collections of other highly prized items add more diversity and value to their portfolios. Whether you choose real estate, stocks, bonds, or a combination of many types of investments, a long-term outlook is often the most successful.
Talk to one of our investment specialists to learn how JWB can help you earn passive income through long term real estate investing.