14 best investments for 2023

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Investing might be one of the best decisions you can make when building a solid financial foundation and planning for your financial future.

There are many possible benefits to investing. When done strategically, investing can allow you to outpace rising inflation and build wealth on your own terms. Additionally, good investments may generate earnings when reinvested, allowing your initial investment to compound over time.

The list below highlights some of the best investments for 2023, mixing both long- and short-term investments as well as the varying levels of risk for each. In no order, here are 14 investment options that may be best for you.

Value stocks
Cryptocurrency
Small-cap stocks
Corporate bonds
Dividend stock funds
Robo-advisor portfolios
Growth stocks
Real estate/REITs
Target-date funds
Certificates of deposit (CDs)
High-yield savings accounts
Roth IRA
Fixed annuities
Money market mutual funds

1. Value stocks

Value stocks trade at relatively low prices as investors sometimes view them as undesirable, which drives their prices down. However, if you’re patient, value stocks could yield significant profit if the stock’s price rebounds after a market overreaction.

Best for: Value stocks may be best for higher-risk investors willing to commit to a long-term investment.
Risks: When you invest in value stocks, you’re betting on a company that other investors may view as unfavorable.
Rewards: Value stocks are often more affordable than other stocks.
Where to buy: You can buy value stocks from online brokers.

2. Cryptocurrency

Cryptocurrency may be one of the trendiest investments of the last few years, though it tends to be volatile. Coin prices tend to fluctuate dramatically since they’re influenced by supply and demand and media attention.

However, this volatility may be why crypto is so trendy — high risk may lead to high reward.

Best for: Cryptocurrency might be best for investors with the highest risk tolerance. While it may lead to higher payoffs, crypto is extremely volatile and risky. Only put into cryptocurrency what you can afford to lose.
Risks: Crypto assets are volatile, and prices may plummet — resulting in potentially huge losses. Cryptocurrency is often unregulated, so government regulators may be unable to help you recover your investment, even in fraud cases.
Rewards: Potentially high payoffs.
Where to buy: You may be able to buy crypto from traditional brokers and online crypto exchanges.

3. Small-cap stocks

Small-cap stocks refer to public company shares valued between $300 million to $2 billion. Small-cap stocks are the lowest of the three market capitalizations: small, mid and large.

People investing in small-cap stocks generally bet on the company’s future success. Investing in small-cap stocks generally means you’re investing in younger companies.

Best for: Small-cap stocks may appeal to higher-risk investors who don’t mind holding the investment for a long time.
Risks: Rising inflation and recessions may be troubling for young companies with fewer resources than larger, more established companies.
Rewards: Small-cap investments may have greater growth potential than large-cap stocks.
Where to buy: You can buy small-cap stocks from online brokers.

4. Corporate bonds

Corporate bonds are essentially IOUs. When purchasing a corporate bond, an investor lends money to the issuing company, which promises to pay it back with interest.

Bonds can be investment grade or noninvestment grade, depending on the issuing company’s credit ratings. This means they can be more or less risky depending on what kind you buy.

Best for: Corporate bonds may be a good option for investors looking for a less volatile investment than value stocks or cryptocurrencies.
Risks: The price of a bond falls when interest rates rise. Since bonds have fixed interest rates, the value of your bond won’t rise with interest rates and will be worth less as a result.
Rewards: Because investors can buy bonds based on a company’s credit ratings, they can choose what level of risk they are comfortable with.
Where to buy: You can purchase bonds through major brokers.

5. Dividend stock funds

Dividends are a portion of a company’s profit it pays to shareholders. Dividend stock funds are any fund that aims to invest in stocks that pay dividends.

When buying a dividend stock fund, you’re anticipating the companies within the fund will continue to pay dividends over time.

Best for: Investors who want to see growth by reinvesting dividends.
Risks: If a company goes into crisis and stops generating profits, you may lose money on your investment since the company has nothing to pay out. You should also note that dividends are not usually guaranteed, and companies will often only pay them out when it makes sense fiscally.
Rewards: If the company generates profits, you may receive cash regularly.
Where to buy: You can purchase dividend stock funds through brokerage firms.

6. Robo-advisor portfolios

A robo-advisor is an AI-powered tool that tries to maximize returns through algorithmic software. A robo-advisor usually collects information on your financial goals, assets and risk tolerance through an online questionnaire. This information informs the robo-advisor’s investment portfolio decisions.

Best for: Robo-advisors may lend themselves to investors looking for an inexpensive and efficient alternative to human financial advisors that they can access 24 hours a day.
Risks: Some may criticize robo-advisors for lacking the human emotion that a financial advisor possesses. If there is a significant market decline, a robo-advisor won’t be able to offer the same comfort and guidance a human financial advisor could.
Rewards: Robo-advisors are generally low-cost.
Where to buy: Robo-advisors are often available through automated investing platforms.

7. Growth stocks

Growth stocks are shares in companies that have earnings growing at a faster rate than the market average. When investing in growth stocks, you may be investing in the idea that a company is undervalued and has the potential to be worth more later.

Best for: Growth stocks may be good for market-savvy investors with a solid understanding of market trends and a higher risk tolerance. Choosing the right growth stocks may require knowing which companies are best positioned to profit from the current market.
Risks: Growth stocks generally don’t pay dividends, so the only way to profit is by selling your shares. Therefore, if the company underperforms, you may take a loss when you sell.
Rewards: If you hold on to your growth stock long enough, you might be looking at a big payout when you eventually sell — if the company grows as expected.
Where to buy: You can buy growth stocks through online stockbrokers.

8. Real estate/REITs

Real estate can be attractive because of the potential for high returns, but getting started can be expensive. If you’re looking to invest in real estate, you may be able to get a mortgage from your bank and pay it off over time.

Real estate investment trusts (REITs) are a way to buy real estate without owning or managing the property. REITs own commercial real estate and can provide large dividends, making them a good investment if you’re not interested in maintaining properties.

Best for: Real estate might be best for investors committed to a long-term investment who have the time to manage a property or multiple properties. You can invest in real estate without managing properties by investing in REITs.
Risks: Investing in real estate can be expensive, so investors may find it difficult to diversify their portfolios with limited liquid funds. If you opt for REITs, there may be more opportunities to diversify your investments.
Rewards: Choosing a good property and managing it well may lead to significant profit over the long term.
Where to buy: You can purchase shares in REITs through brokerage firms.

9. Target date funds

Target date funds allow you to choose a target retirement date, and the fund will allocate your investments based on that date. The fund will automatically adjust and balance risks based on where you are in the cycle.

Best for: Target date funds might be best for people saving for retirement.
Risks: A target date fund often invests at least in part in stocks, so inflation and markets can affect your income.
Rewards: Target date funds diversify your assets for you, meaning you don’t have to manually diversify your portfolio after investing in a target-date fund.
Where to buy: You can sometimes get target date funds from major brokerage firms. You may be able to invest in target date funds through company 401(k) plans as well.

10. Certificates of deposit

Certificates of deposit (or CDs) involve paying a lump sum that remains untouched for a period of time as it gains interest. CDs are less risky, but the payout may be less significant than higher-risk investments such as growth stocks.

Since CDs are fixed and federally insured, you can limit market volatility by opting for this investment. As a result, CDs tend to be one of the safest investments.

Best for: CDs may appeal to lower-risk investors.
Risks: If you access your money before the maturity date, you may have to pay a penalty fee. There’s also a chance that inflation grows quicker than your money, potentially lowering real returns over time.
Where to buy: You can purchase CDs at banks and credit unions or through a brokerage firm.

11. High-yield savings accounts

High-yield savings accounts differ from traditional ones because they pay out a higher annual percentage yield (APY). Through high-yield savings accounts, investors can also get the stability of a federally insured account.

Best for: High-yield savings accounts may be best for investors looking for low-risk quick wins. High-yield savings accounts may have a low minimum deposit or no minimum.
Risks: High-yield savings accounts may have transfer and withdrawal limits or fees.
Rewards: High-yield savings accounts can be FDIC-insured, meaning deposits up to $250,000 are protected in a bank failure.
Where to buy: You may find the best savings account rates at online-only banks.

12. Roth IRA

Roth IRAs may be among the best retirement fund options out there. Like a traditional IRA, a Roth IRA allows you to grow your retirement savings over a long period. A Roth IRA differs from a traditional IRA in that you can withdraw your funds tax-free when you’re ready to retire.

Best for: Roth IRAs could benefit anyone starting to save for retirement.
Risks: Withdrawing from your Roth IRA before retirement will result in a 10% penalty on earnings.
Rewards: A Roth IRA allows you to invest for retirement with after-tax funds, which allows for tax-free withdrawals.
Where to buy: You can open a Roth IRA through a brokerage firm or at a bank.

13. Fixed annuities

Fixed annuities allow you to pay a set amount in exchange for guaranteed compensation. Fixed annuities have fixed interest rates and a fixed rate of return, meaning you know how much income you’ll receive.

Because of this predictability, fixed annuities may be one of the most low-risk investments, as income doesn’t depend on market movement.

Best for: Fixed annuities may be a good investment for people nearing retirement. This consistent stream of income can provide investment stability after you retire.
Risks: You can’t access your money before the maturity date of your annuity. You may incur a penalty fee if you need to access your money.
Rewards: Avoid market volatility. You can be sure you’re receiving income regularly with a fixed annuity.
Where to buy: You can buy fixed annuities through a brokerage firm, bank or insurance company.

14. Money market mutual funds

Money market mutual funds tend to be one of the lowest-risk investments. These fixed-income mutual funds invest in debt securities with little to no credit risk.

These investments are generally safer because the debt securities they hold must follow regulatory retirements, meaning they have to reach a certain standard of quality and liquidity.

Best for: Money market mutual funds may lend themselves to low-risk investors looking for quick cash. Compensation isn’t as high as other investments, but risk and volatility are much lower.
Risks: Money market funds aren’t federally insured, so you’ll likely lose your investment if your bank fails.
Rewards: Low volatility and risk make you very likely to see positive yields.
Where to buy: You can invest in money market mutual funds through brokerage companies.

What to consider before you invest

Deciding what to invest in depends on several factors, most of which are specific to your financial situation and external market conditions. Here are some factors to consider before investing.

Risk tolerance

In investing, risk tolerance refers to how willing you are to open yourself up to potential financial losses. Cryptocurrency, for example, is a particularly volatile market and is usually more attractive to investors with a high-risk tolerance. The S&P 500, on the other hand, is less subject to volatility, making it more appealing to low-risk investors.

This isn’t to say one is better; the two simply lend themselves to different investing styles. High-risk investors may see more significant returns than low-risk investors, but the potential for loss could be much greater.

Budget

Your budget plays a large part in what investments you decide to make. Investing in real estate, for example, may require a larger budget. However, a lower-budget investment might be a value stock, with the expectation of the price growing over time.

Financial knowledge

You should also consider your own financial knowledge when investing. Successfully investing in growth stocks, for example, may require a detailed understanding of market trends and which companies and industries are best positioned to thrive in the current market.

The S&P 500, on the other hand, removes some guesswork. The companies in the index have proven successful, and it doesn’t take significant financial knowledge to know they’re relatively safe to invest in.

Time horizon

Some investments may yield relatively quick returns. For others, you may not get compensated for years after you invest. For example, small-cap stocks bet on a young company’s continued growth, which may take several years or more.

Value stocks also anticipate changing market valuations of companies. This may require patience with the market to see a return on investment.

Liquidity

Liquid assets are earnings easily translated into cash.

This is important because liquidity varies in investments. For example, stocks and bonds you could sell at any time without large fees would be highly liquid. Real estate, however, is a less liquid asset, as it can take longer to buy and sell, and significant transaction fees are typically involved. This may also include paying capital gains tax on real estate profits.

Consider how quickly your investment can be converted into cash when considering your time horizon.

What’s next: Build your financial future

Investing is an important part of your financial future but isn’t the only consideration. Creating a solid financial foundation is also about paying down debt, forming a good credit score and learning to budget.

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