If you have long-term goals, investing your money is wise because your assets will hold out against inflation, and you can profit from them in the future.
Smart investment decisions will make your money work for you and potentially earn you an income while asleep. This post will cover the top ten best investment vehicles with varying risks and volatility.
What is an Investment Vehicle?
Investment vehicles are assets you invest in to achieve a specific investment goal. There is a range of different investment vehicles to meet your desired objectives depending on your risk tolerance.
Before you invest, ensure you understand the risks involved with every investment strategy.
Below are the ten best investment vehicles with varying risks and suitable for both short and long-term goals:
1. Health Savings Account (HSA)
The health savings account (HSA) is one way to build wealth. It’s a form of savings and investment account with a three-tiered tax benefit, which will help you pay for any medical bill in the future.
The potential return is 9% or more, and the time commitment can be minimal to long-term.
A triple tax benefit means:
- You put pre-taxed money into an HSA
- Any investment gains are not taxed
- You won’t pay any tax when you withdraw money to pay for medical expenses
But, there are some restrictions you need to be aware of with an HSA. You need a high-deductible health plan to meet the requirements for an HSA account. This makes HSAs better for healthy individuals who rarely visit the doctor.
HSA offers two options:
- An investment account
- A cash savings account
This account should be considered a retirement rather than a medical expense account. For example, if you withdraw money from this account for something that isn’t for medical expenses before age 65, you’ll pay a 20% penalty fee. After 65 years of age, you can withdraw for other purposes without paying any penalties.
2. High-Yield Savings Account
To build wealth, it’s recommended to have an emergency savings account. You can make use of a high-yield savings account to save for emergencies. You can earn higher interest on your funds than a regular savings account.
The potential return is 2.50% with a minimal time commitment.
3. Exchange-Traded Funds (ETFs)
Another long-term investment strategy you can use is Exchange-Traded Funds (ETFs).
ETFs are similar to mutual funds in that you can find them on the stock market and track an index, such as the S&P 500.
But ETFs are usually cheaper, have lower taxes, and sell in real-time, unlike mutual funds, which trade at the end of the day.
ETFs comprise securities that include bonds, stocks, commodities, and cryptocurrencies. They are a good investment choice to diversify your investment portfolio as ETFs have 100s of highly successful companies.
The potential return is at 9% or more. It’s best to start investing in ETFs as soon as possible since it suits long-term investment goals.
Investing in farmland is one of the oldest investment vehicles and has created significant wealth over generations.
It’s possible to earn huge returns on farmland without seeing high volatility compared to stocks. But you’ll need to invest for up to 10 years to make money passively.
The potential return can be 11% or more, but it’s illiquid and not beginner-friendly.
5. Corporate Bonds
Corporate bonds work in similar ways as government bonds. The only difference is that you’re loaning to a company, not a government. So, the government won’t support the loans, meaning they are riskier. The potential returns are at 3% or more.
Corporate bonds are similar to a bank in that you’ll be paid an interest rate when you invest. They’ll also repay the original loan to you, and you’ll receive payment until the end of your contract.
Bonds are a safer option than stocks, ETFs, and mutual funds because the company must repay your money with any interest within a specified time.
Investing in crypto may be a great option if you can cope with a volatile market and grasp the tech world.
Cryptocurrencies can bring huge returns, like 100% or more, and some investors think crypto represents the future.
If you are considering investing in crypto, you can either lend your crypto assets, fund crypto-linked investments, or buy cryptocurrencies.
But you should be aware that cryptocurrencies are highly volatile and risky.
7. Certificates of Deposit (CDs)
Certificates of Deposits (CDs) may be suitable for a low-risk and low-volume investment vehicle. The potential returns of 0.30%-2.20% are smaller than other investment vehicles on this list, but it’s also less risky than other options.
They’re a type of savings account where you store a sum of cash to gain interest rate for a fixed time.
But if you withdraw early, you may lose the interest rate and pay penalty charges.
Usually, CDs come in increments of 6, 12, 24 months, and so on.
8. Private Real Estate
Real estate is a great way to diversify your investment portfolio. Private real estate has many benefits, including value appreciation and creating a passive income yield of 6.1%.
Private real estate is excellent since it performs well during economic volatility and high inflation. You should know that it will require a longer time commitment and can have high upfront costs to set it all up.
But, if you want to invest your money during inflation or an economic downturn, then private real estate can be a wise option.
9. Fine Art
In 2021, art and antique sales increased to around $65.1 billion, as reported by Art Basel and UBS Global Art Market Report. Historically, wealthy individuals invested in art, but nowadays, it’s more accessible, and you can invest with less.
If you can’t afford to buy blue-chip art, Masterworks makes it accessible for you to invest in fine art.
You can start investing with a minimum investment of $1,000 for owning part of the art pieces. You also don’t have to worry about doing research since Masterworks chooses art based on your risk level.
If you’ve invested in a painting that sells, you’ll receive your share of the profits. But art can take many years to sell, so you should use this as a long-term investment to add to your portfolio.
10. Fine Wine
If you’re a wine lover interested in investing in appreciating assets, fine wine may suit you.
Fine wine has regularly topped other mainstream asset classes, like gold and S&P 500.
It’s also less volatile than stocks, making it a great addition to your investment portfolio. Since fine wine isn’t connected to the stock market, it can be suitable as an alternative investment strategy.
Investing in fine wine can be lucrative, but you should be careful when buying and selling independently. Inauthentic wines are easy to buy, and others can be difficult to store correctly.
You can use platforms like Vinovest to invest in wine. They verify the authenticity of wine while storing them in a great environment and transporting them to buyers. Every bottle comes with insurance as well.
The app allows you to choose your level of risk and buy and sell your wine.
You can also automate your investment, whereby you grow your wine portfolio over time. The minimum investment is $1,000, with a 2.85% annual fee.
Asma is a freelance writer specialising in finance and business niche topics. Her experiences include working at one of the world’s oldest and largest asset management firms.
Apart from writing, Asma also enjoys reading about finance, business, and entrepreneurship.