If your goal for the new year is to make more money, you may want to consider how investing can boost the balance in your savings account. But getting involved in the investment market isn’t always so easy, especially if you don’t have a lot of foundational knowledge to work from. Fear not, ambitious savers!
In this post, we’ll explore 5 investment ideas to help you make 2020 your most prosperous yet.
1. Retirement savings
One of the best ways to invest your money is to invest in your own future. These days, it costs a lot of money and a lifetime’s worth of work in order to retire. It’s for this reason that so many financial experts recommend that you start saving early on. According to Investopedia, here’s how much you should have in your 401k by age:
- Age 20-29: Average 401k balance is $11,800
- Age 30-39: Average 401k balance is $42,400
- Age 40-49: Average 401k balance is $102,700
There are many different types of retirement accounts you can choose from if you want to start putting money toward your savings:
- 401k
- IRA
- Roth IRA
- SEP IRA
Each retirement plan has their own tax regulations and contribution amounts, so you’ll want to take these into account when you choose which one is best for your situation. Some employers even offer match programs where they will match your contributions up to a certain amount, which basically means free money for you—talk about boosting your account balance!
The main drawback to investing in a retirement account is that there are limitations on when you can withdraw money from them. If you have some sort of emergency that requires you to dip into your account early, be prepared to pay a penalty price.
2. High-interest bank accounts
Another easy way to grow your savings is to put your money into a high-interest savings account, like a CD. Here’s how it works. When you put your money into a CD account, you’re allowing your bank to use the money you have in your account for loans and other uses, and in exchange, the bank repays you with added interest. Of course, there are a few caveats that come with CD accounts. Most won’t let you access the money for a predetermined amount of time, unless you’re okay with incurring a high penalty fee. Another potential drawback with CDs is that sometimes the rates don’t account for inflation which could mean that interest rates aren’t as valuable.
3. Real estate
If you’re looking for a more advanced investment, you might think about investing in the commercial real estate marketplace. Commercial real estate is different than residential real estate for obvious reasons—your tenants won’t be living on your property. Commercial properties often yield higher revenue than residential properties, but they also involve a lot of work and coordination. Here are a few of the benefits and drawbacks of investing in commercial real estate:
Benefits
- Limited hours of operation
- Tenants often take more pride in maintaining their business’ property
- More flexibility in leasing terms
Drawbacks
- More tenants could mean more time
- You’ll need to hire contractors for building maintenance
- There can be higher risks involved
4. Peer-to-peer lending
Peer-to-peer lending has become a popular means of investment just in the last decade or so. This avenue essentially takes out the role of a bank for small business and personal loans and instead relies on private lenders to provide capital for people to borrow. Peer lending comes with several obvious risks, but the accrual of interest can be substantial.
To get started with peer-to-peer lending, you’ll want to register with a peer-to-peer lending platform. This way, you’ll have a more secure way to exchange money and you’ll have more protection than if you were to provide lending services under the table.
5. Robo-investing
If you’re looking for a seamless way to start building your investment profile, you might consider robo-investing. There are many different applications to choose from, some automatically make contributions and others round-up money you spend throughout the month. But no matter which app you choose, you can bet that these tools are much easier to understand than navigating the stock market on your own.
If making more money is your M.O. in 2020, use these tips to help!