Whatever your investment starting capital may be, you want to make sure you’re investing it appropriately, so you don’t lose it all. There are many strategies out there, with varying degrees of risk and profit. Here are a few safe options to start building your wealth.
Pay Off High Interest Rate Debt
Start paying down high-interest debt, such as credit cards. The most expensive rate for borrowers is credit card interest, which is compounded. Before you start investing, you don’t need to pay off low-interest debt like mortgages and auto loans.
Invest In ETFs
For investors who don’t want to pick individual companies, exchange-traded funds (ETFs) are an excellent option. These low expense ratio and passively managed funds track the performance of specific indexes and can provide exposure to a wide range of asset types.
Because their holdings change infrequently, ETFs, which provide quick portfolio diversification, are also well-suited for taxable investment accounts.
Invest In REITs
REITs are professionally managed portfolios of properties. The majority of REITs are organized around a certain type of real estate, such as shopping malls or data centers.
REITs pay greater dividends than other equities because they must distribute at least 90% of their taxable income, which is generated by rent and interest payments, to shareholders. As the price of real estate rises, their stock prices will climb as well.
Focus on Growth Industries and Stocks
Growth stocks can help your portfolio outperform the stock market as a whole. Fast-growing businesses not only expand quicker than other businesses, but buying the stocks of nimble businesses can also help your portfolio recover faster from recessions or other stock market shocks.
Remember to Diversify Your Portfolio
Regardless of how you choose to invest your $100,000, establishing a diversified portfolio is key to achieving your financial goals. No single company or investment should have an outsized place in your portfolio.
Diversifying eliminates the risk of your portfolio’s value changing dramatically if one company encounters misfortune. A diversified portfolio is also more likely to generate relatively consistent returns from year to year.