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How to invest for the long term

Updated on April 7, 2015

Since there is no one size fits all investment plan, there are many options to choose from. These options range from the most conservative, to the most aggressive and all of the best options will be covered.

Conservative Investments

1. CD's: CD's offer better returns than savings accounts due to your money being locked in for an extended period of time. However, CD rates are still extremely low compared to more aggressive investments, and are not recommended for the long term.

2. Government bonds: Government bonds generally offer slightly higher returns than CD's, however, they are just as secure, because they are insured by the full faith of the United States government.

3. Money market funds: Money market funds offer lower returns than the other options, but they are much more liquid. Money market funds are more recommended for short term goals, but they can provide liquidity "just in case".

Moderate investments

1. Investment grade corporate bonds: Investment grade corporate bonds are simply corporate bonds with a credit rating of BBB or higher. This means that credit agencies believe the corporation is able to meet its current financial obligations. Corporate bonds can be risky however, despite being financially secure at the moment, the future is uncertain.

2. Real Estate/REITS: While the recent housing bubble may have pushed investors away from this option, you can avoid risk by simply buying cheap, and producing as much rental income as you can.

Aggressive investments

1. Mutual funds

After the recent recession, it is more clear than ever that stocks are risky. Although volatility is expected, the stock market is arguably the best investment for people with long term horizons. Index funds, mutual funds that correspond directly to market indexes, generally perform well in the long term thanks to low fees. Actively managed funds; funds that are traded by an "expert" are not recommended due to higher risk and fees.

2.Junk bonds

Non-investment grade bonds, aka junk bonds, are significantly riskier than their investment grade counterparts. While return potential is higher, thorough research is recommended, as default is likely imminent.


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