Most of us dream of long-term financial stability, which means we don’t have to worry about living paycheck-to-paycheck. However, it is key to understand that this isn’t something that will just happen automatically – tomorrow’s financial security is born out of the sound investment decisions of today.
The good news is that getting to this point isn’t necessarily as difficult as you might think. By not just investing but by diversifying your efforts across a few different asset classes, you can work towards the long-term financial stability you need to live the lifestyle you enjoy to its fullest. Along the way, you’ll need to balance growth potential with risk mitigation in a way that helps to craft a well-rounded investment strategy for yourself. What follows are a few smart investments you can use to begin putting together precisely that immediately.
Wholesale Real Estate
Investing in real estate is a great technique many people use to build long-term financial stability. Wholesale real estate, in particular, is known for its low cost of entry (compared to other types of real estate investing) and its relatively low initial risk. Not only does this offer the potential for capital appreciation, but with the right approach, you could earn a passive income through assets like rental properties as well.
Wholesale real estate is a type of strategy involving you as an investor locating a property you don’t intend to buy yourself. Instead, you find a buyer to purchase it at a higher price than the one the seller agreed to – thus making a tidy profit along the way. Note that people who invest in wholesale real estate typically do a lot of work with distressed properties, although they don’t fix them up like a “flipper” would.
Diversified Stock Portfolios
An old saying reminds us how it isn’t wise to “put all of your eggs in one basket.” Whoever coined that phrase was talking about the importance of diversified stock portfolios, whether they realized it or not.
As the term implies, this is a strategy that will see you spread your money around over a number of different investments and asset classes. Not only will this help mitigate risk as much as possible (because there is no “single point of failure” that can occur to wipe out all the gains you’ve made), but it could potentially yield a much higher return on investment in the long run.
These benefits can be heightened by capitalizing on a lot of investments that move in opposite directions, so to speak. The more diverse your portfolio is, the stronger it ultimately becomes.
Index Funds
To create long-term financial stability for themselves while capitalizing on broad market exposure, many people turn to index funds to do all this and more.
One of the major benefits of index funds is that they have lower risk, again through the type of diversification outlined above. An index fund is not a single entity but is rather a collection of hundreds or even thousands of stocks and bonds.
In addition to being a great way to get in on certain investments that you might otherwise not have a chance to, this is also an approach that will benefit you by way of lower taxes as well. Actively managed funds change their stock or bond holdings frequently, which is when you pay taxes on those earnings. The same is not true of index funds.
Retirement Accounts
For many, the goal of creating long-term financial stability is necessary because of a focus on their retirement years. They spend decades of their lives working hard, and when the time finally comes to leave the labor force, they want to enjoy the lifestyle they’ve always dreamed of. That is what retirement accounts are all about.
Depending on how soon you plan on retiring, your current savings, your projected healthcare needs, and other factors, you can choose from a huge number of retirement accounts. Some of the most popular include IRAs (individual retirement arrangements), Roth IRAs, 401(k) plans, 403(b) plans, and more. Each comes with its own unique benefits and tax advantages, so be sure to choose one that aligns with your overall strategy.
Bonds
Finally, we arrive at bonds – a perfect way to generate a level of income for yourself over the long haul and do so in an incredibly stable way as well.
Usually, bonds pay out interest two times per year – creating the type of predictable income stream that many come to depend on. Once a bond reaches maturity, you also get back the entire principal amount. Because of that, bonds can be an efficient way to preserve wealth while still reaping the rewards of investing.
Achieving Long-Term Financial Stability Takes Time
In the end, it’s important to understand that achieving the type of long-term financial stability that most people crave is less the product of any one major move and is more about a series of smaller and more strategic ones. Entering the world of wholesale real estate is one that has been beneficial for many people, for example. However, it shouldn’t be your only step toward accomplishing your larger goal.
The key to success is to look inward. Consider your precise goals within the context of other factors like your risk tolerance and timeline. Given your unique situation, only then will you work your way backward to the types of investment strategies that make the most sense. Don’t make the mistake of assuming that you can follow some “one size fits all” path to financial prosperity that, in truth, doesn’t really exist.