Last year's stock market returns were impressive. The S&P 500 Index, the main benchmark for US stock market performance, rose an astonishing 24% in 2023.
As with most things in life, there is no guarantee that the outcome will be the same in 2024. But if you're looking for some of this year's best investment ideas, here are some ideas worth considering.
1.Stocks
Purchasing stock gives you a small ownership stake in an individual company. If the company is in good financial shape and its stock price is higher than the price you paid for the stock, you can sell the stock and make a profit.
Bonus benefits: Earn best-in-class benefits with this brokerage account
read more: Best online stock broker for beginners
People often choose to invest in stocks. That's because stocks have a lot of potential to increase in value over time. The historical annual average for the stock market is about 10% per year.
But the problem with buying stocks is that the market can be volatile. To offset some of these inherent risks, most experts recommend allocating money in your portfolio to stocks. To do this, subtract your age from 110 to determine how much of your portfolio should be in stocks. For example, if you are his 35 year old, you should invest approximately 75% of your portfolio (110 minus 35) in stocks and the rest in more stable investments such as bonds.
Using this investing rule as you age allows you to maximize your potential for investment returns while gradually lowering your risk as you approach retirement age.
2. Index funds
Index funds are another way to invest in stocks, but they're especially useful for people who aren't interested in buying individual stocks. Billionaire investor Warren Buffett recommends that most people use this investment strategy, allocating 90% to index funds and 10% to bonds.
You can buy index funds that track the S&P 500 in your online brokerage account. This includes the performance of approximately 500 of the largest publicly traded companies in the United States. This involves a lot of hard work selecting stocks from different sectors, such as technology and energy. , so no part is overexposed.
One common way to invest in index funds is to buy an exchange-traded fund (ETF). These low-cost funds are a great option if you don't have much money to invest, and you can start with as little as $1. The annual fee, also known as the expense ratio, is also very low.
For example, the SPDR® Portfolio S&P 500® ETF has an expense ratio of just 0.02%. This means you pay just $2 in annual fees for every $10,000 invested.
3. Certificate of Deposit
A certificate of deposit (CD) is a type of savings account that can earn you a lot of money with little risk. Unlike a savings account, your money is usually kept for a while in a savings account rather than being available immediately.
If you withdraw your money before the CD expires, you'll likely have to pay a fee. These vary depending on the bank, amount deposited, and CD maturity period. For example, Wells Fargo charges him 12 months' worth of interest for early withdrawals on her CDs with maturities greater than his two years. In this example, if you invest $10,000 with a 4% interest rate and a 5-year term, you would pay $392 in early withdrawal fees.
But instead of keeping your money in a bank or brokerage for a while, you can earn a high rate of return. Many CDs currently offer rates above his 4%. If he invests $10,000 in a five-year CD that pays 4%, he will end up with about $12,166 when the CD expires.
CDs can be purchased through your bank or brokerage account. If you purchase a CD through an intermediary, you may be able to sell it on the secondary market. This is useful if you need to sell the CD before it expires.
Things to remember before investing
Any of the above options can be a great place to invest your money in 2014, but it's important to remember the following: You should not invest money that you think you will need in the next few years. The cash you invest should not be money you need for emergencies, car repairs, appliances, or other expenses.
If you're not ready to part with your money for a long time, you may want to consider putting it in a high-yield savings account. Many of them currently pay interest rates above 4%. And if you need to access your money urgently, there are no penalties for withdrawing it.
Recommendations for the best credit cards of 2024
Our experts will carefully consider the most popular offers and choose the ones that are worth putting into your wallet. These standout cards come with great perks like generous sign-up bonuses, long 0% intro APR periods, and powerful rewards.
Click here to learn more about recommended credit cards
