Let’s be Honest: we are living in uncertain times. This year has brought job insecurity, a public health crisis, and a chaotic financial market. How do you survive and thrive in today’s conditions? That is the $64,000 question.
During the coronavirus-induced market mayhem in March 2020, many people suddenly became interested in the stock market. There were plenty of buying opportunities for stocks previously too overvalued for young investors to buy. The market bottomed on March 23, and the benchmark indexes are trading at all-time highs, leaving some people thinking they have missed out.
However, there is an abundance of opportunities to invest and grow your money for the long-term. You only need to know where to look. To help you navigate your investment options, we have compiled a list of six safe ways to grow your money for the long-term.
1. Index Funds
Legendary billionaire investor Warren Buffett has often stated that “the best thing” for most investors who want to invest is to park their money in index funds. His championing of index funds is justified by the fact that they are generally expected to go up over time. So, what are index funds anyway?
An index fund is a portfolio of stocks that mirror a financial market index’s makeup and performance. For example, in Buffett’s case, he is a staunch advocate of the S&P 500 index fund.
Here are some other examples from the United States:
- Schwab S&P 500 Index (SWPPX)
- Fidelity 500 Index (FXAIX)
- Vanguard Growth Index (VIGRX)
- Vanguard Total International Stock Index (VGTSX)
The global financial market sells a diverse array of products that specialize in index funds. You only need to know where to look, find out what the expense ratio is, and determine its performance over time.
2. All-In-One Checking and Investing Account
Most consumers possess a checking account for their day-to-day transaction needs. Unfortunately, the trade-off for the convenience of a checking accounting is that you have no growth opportunities for your money. You are receiving nothing in return for the money stored here, and further, you are even paying for the privilege of storing your money at the bank.
Is it time that you transition to an all-in-one checking and investing account?
All-in-one checking and investing accounts provide the flexibility of an everyday account. You still receive the same banking features of a checking account: widespread ATM access, access to your money instantly via debit card, and mobile banking. The difference? The money stored within this account is automatically invested into a diversified portfolio of ETFs, allowing you the dual benefits of accessibility and growth!
Real estate investing can be a complicated and costly endeavor. From the upfront costs to acquire a property, to the extensive maintenance aspect, you might wait a couple of years to see a return on your investment. A worthwhile alternative to physical ownership of property could be a REIT.
A real estate investment trust (REIT) is a publicly-traded fund that owns, operates, and finances income-producing properties. Most REITs, which trade on major stock exchanges, offer several advantages in today’s chaotic market:
- REITs are liquid assets that can trade like a stock or exchange-traded fund (ETF).
- REITs are a great diversification tool for investment portfolios.
- REITs have historically matched or exceeded the returns on the S&P 500 and extended higher returns than corporate bonds.
- REITs offer investors regular income with high monthly or quarterly dividend payments.
Unsure what to look for? Here are just some of the dozens of REITs on the open market in North America:
- Schwab US REIT ETF (SCHH)
- iShares Core US REIT ETF (USRT)
- Global X SuperDividend REIT ETF (SRET)
- VanEck Vectors Mortgage REIT Income ETF (MORT)
4. Dividend Stocks
Even the most saavy savers struggle to find growth opportunities for their money in a world where interest rates are historically low, paying you next to nothing on your deposits. For this reason, the stock exchange is an attractive alternative for those looking for greater growth opportunities for their savings. While parking your capital in equities, or stocks, does come with some risk, choosing the right stocks that possess an excellent track record can be the best way to, as the saying goes, let your money work for you in a safe and secure capacity.
Ultimately, you will want to invest in stocks that pay a regular and respectable quarterly dividend. Although companies have been homing in on their dividends due to the coronavirus pandemic, many firms’ income-producing payments every three months are better than what you could earn with a cash deposit at the neighborhood bank.
Here are some stocks to consider for the long-term:
- Walmart (WMT): 1.45% yield
- Kroger (KR): 2.31% yield
- Algonquin Power & Utilities Corp (AQN) 3.20% yield
- TD Bank (TD): 4.46% yield
- Suncor (SU): 3.66% yield
- 3M Co. (MMM): 3.46% yield
5. GIC Laddering
Are guaranteed investment certificates (GICs) attractive in this environment? At first glance, earning 1.75% interest over a five-year term may not seem like much, especially considering that this would barely keep up with inflation. But GIC laddering might be the solution to overcoming this hurdle.
Here is how it works: when each term matures, you reinvest the new amount (principal plus return) in a five-year GIC term. This allows you to maximize the returns from your GIC investments without locking all of your capital into a long-term investment.
The yield on bonds is rather minimal in today’s market. There are opportunities to receive a higher yield by investing in Chinese, Indonesian, or Indian bonds. However, if you are purchasing Canadian bonds and U.S. Treasurys, you can expect your return to be much smaller. With that said, this is the sacrifice you must make if you demand safety and certainty over the long-term.
Is the financial market an intimidating arena? Like anything else in life, you need to do your research, ask for clarification on things you are not sure about, and do what is best for you and your wallet. If you are saving and investing for the long haul, you should be confident that you are doing so in a safe, appropriate, and dependable manner.