Investing is a great way to grow wealth over time and meet financial goals. The best investments range from safe, lower-return choices like savings accounts and CDs to riskier, higher-return picks like stocks and bonds.
Real Estate
Real estate offers stable, competitive returns, tangible assets, and a substantial diversification boost to a portfolio. There are various options for individuals looking to invest in real estate, including rental homes and large industrial centers.
Rental properties are popular among individuals with do-it-yourself renovation skills or who want steady income from a passive investment. Another strategy is investing in Real Estate Investment Trusts (REITs), similar to dividend-paying stocks.
However, many of the most common ways to invest in real estate come with high barriers to entry and require significant capital upfront. Other risks include unexpected maintenance costs, tenant problems, and interest rate fluctuations that can erode cash flow.
Stocks
Stocks, mutual funds, and exchange-traded funds offer an opportunity to grow your money based on your risk tolerance and time horizon. They also have the potential to provide inflation-beating returns.
Even large, established companies’ stocks can fall in price. This means that you may lose money when you sell your shares.
If you have RSUs or options, deciding whether to exercise and sell them and when is a complicated investment and tax decision. Caliber has an experienced team working with these types of situations and will be able to help you navigate the complexity.
Bonds
Investing can help you achieve financial goals, save for retirement, or overcome financial difficulties. But it’s essential to find the right mix of risk and return. This may change depending on your stage in life, income, and career.
Bank fixed deposits (FDs) are a safe place to store money you need within a predetermined time frame. You can also invest in green bonds, a fixed-income investment that raises money for climate and environmental projects.
Corporate bonds work similarly to government-backed bonds but are loans to private companies. They can offer higher yields but are more volatile and often carry more credit risk than government bonds. A broker can assist you in purchasing bond funds or individual bonds.
ETFs
Investing in ETFs enables you to diversify your portfolio by buying a collection of securities that mirror an index. These investments are more diversified than individual stocks and offer lower internal management fees than mutual funds.
Leveraged ETFs also seek a multiplied return on their underlying assets, such as 2x or 3x. However, these ETFs are more volatile and may only be appropriate for some investors.
ETFs can be an excellent investment choice for those new to investing or with limited portfolios. They also provide a great opportunity to diversify within a sector or geographical area. However, ETFs shouldn’t be used as a replacement for a diversified portfolio or as an attempt to beat the market. The best way to achieve that is through a well-designed, long-term portfolio.
Alternative Investments
Alternative investments offer higher return potential with lower risk than traditional assets, making them a critical asset class for investors and current or aspiring investment professionals. They are typically lighter-regulated, illiquid, and often correlate poorly to standard asset classes.
Until recently, however, most alternative strategies were limited to institutional investors (LPs). Private equity firms have turned to digital platforms to tap the vast pool of retail wealth.
These platforms aim to broaden access, simplify the investment process, reduce fees, and provide new data analytics. In addition, some platforms offer new secondary markets in which individuals can sell ownership stakes of alternative assets.
They also allow individuals to invest in diversified alternatives through funds and ETFs. This allows them to trade more efficiently than in the past.
