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10 Smart Ways To Start Investing Your Money (2022 Update)

Regiena Regunathan
WRITTEN BY
UPDATED
August 05, 2022

It seems like everyone is investing these days, and that it’s the absolute and only way to grow your wealth. While that’s somewhat true, investing your money is really nothing more than a means to ensure your money is working for you.

 

There are many different methods of investing, each with their own strategies. That means you can adjust your choice if it doesn’t work with your schedule or risk tolerance. That said, switching investment philosophies can have a price.

 

 

In this article, we look at all the best investment ideas you can explore to grow and accumulate your wealth.

 

But first – Should you invest?

 

Remember – investing is not a get-rich-quick-scheme no matter how much your colleague tries to convince you to pump your funds into the next ‘big thing’.

 

Investing is a means to supplement your income, finance your retirement, or even get yourself out of a tight spot financially. Above all, investment hopes to increase your money, enabling you to reach your financial objectives.

 

Even though investing can help you accumulate money, it’s important to weigh the risks and possible rewards. You’ll want to be in a position to accomplish that financially, which means you’ll need to have your finances guarded. This could mean first having sustainable debt levels, a sizable emergency fund, and the ability to ride out market ups and downs without having to use your money.

 

Investment options can range from highly safe alternatives like certificates of deposit, to medium-risk selections like bonds, and higher-risk options like stock index funds. That’s fantastic news since it means you can select investments that meet your risk tolerance but still offer a wide range of returns. Mixing assets can help you build a balanced and diversified portfolio that caters to your needs and goals.

 

If you’re set to invest – let’s take a look at the best options available to you.

 

The 10 Best Investment Ideas (2022 Update)

 

1. High-yield savings accounts

 

A high-yield savings account offers more benefits than just keeping your money safe. They offer a greater interest rate than a conventional savings account, which means that any money in a high-yield account should grow more quickly.

 

For example, the high yield savings account from Brio Direct offers up to 1.8% annual percentage yield. A pretty decent return when compared to leaving your money in a standard account, since the national savings average is roughly 0.03% APY.

 

Despite the economic impact of the Coronavirus epidemic, you may still earn a higher interest rate compared to a traditional savings account – which is where the majority of people save their money.

 

Some may argue that you lose money with a high-yield savings account but in reality, a high-yield savings account still makes great sense if you haven’t established an emergency fund or are striving to meet a specific financial goal.

 

A good choice for

Investors who are afraid of taking risks, especially those in need of money right away and do not want to take the chance that they won’t receive it back.

 

 

2. Certificates Of Deposit (CDs)

 

person sits on coins

 

The returns from Certificates of Deposits (CDs) may not make you scream in delight but their stability and consistency make them appealing, particularly during difficult economic times. And saving and safeguarding funds are key objectives for many people, especially with the US economy potentially experiencing economic stagnation and inflation at a 40-year high.

 

CDs often pay greater interest rates than savings accounts, and are also produced by banks. With CDs, you save your money for a specific time at a predetermined interest rate. Once the CD matures, you receive your initial money back along with any accumulated interest. An example would be the CD facility offered by Bread Savings, where you can earn 2.5% when you lock away your money for one year.

 

If you anticipate an increase in interest rates, short-term CDs typically less than one year, can be a better choice since they allow you to reinvest at a greater rate when the CD matures.

 

Be aware that you won’t have the flexibility to withdraw your money prior to the maturity date on your CD, though you do get interest payments from the bank at an interval of your choice.

 

A good choice for

Although investing in CDs won’t make you rich, if you’re searching for a place to keep the money for a while and value security, a CD is something to think about.

 

 

3. Money-Market funds

 

Money-market funds (also sometimes called money market mutual funds) are a type of open-ended mutual fund offered by banks, brokerages and mutual fund companies. Rather than investing in stocks, they invest in low-risk securities with short-term maturities, such as US Treasury securities, short-term corporate bonds, and other assets with a minimal default risk. Profit is typically earned in the form of dividends.

 

Investors often use money market mutual funds for relatively low-risk positions in their portfolio. They may generate higher returns for you than a typical bank savings account, whilst being a less volatile alternative to stock market investing. This makes it a useful form of investment for anyone looking to place their cash set aside for future investments, or as a safer alternative to equities, and to balance any risk that could arise from their portfolio.

 

Khan Academy breaks down the basics of them here:

 

 

A good choice for

Although money market funds won’t provide the high returns of the other options on this list, the growth in money market funds is more comparable to rates on high-yield savings accounts.

 

 

4. Corporate Bonds

 

Corporate bonds are bonds issued by a corporation, usually one that is publicly traded.

 

They are often considered an essential part of any diversified portfolio and are frequently viewed as the cushion that absorbs the risk of equities in one’s investment strategies.

 

They have a wider variety, more liquidity, and less volatility than stocks, but they also often offer lower long-term returns. In the case of corporate bonds, the yield increases with the probability that the firm will fail. In contrast, the yield on bonds issued by established, major corporations would often be lower.

 

A good choice for

Investors who are ready to take on a little bit more risk in exchange for a fixed-income instrument.

 

 

5. Government bonds

 

investment chart on phone

 

When it comes to government bonds, you lend money to the government in exchange for an agreed-upon interest rate. Governments use them to create capital for new projects, and investors can use them to receive a stable payout on a regular basis.

 

Due to the U.S. government’s creditworthiness, government bonds are essentially a risk-free investment. The drawback of government bonds is the returns: they offer less of a return than other investment options in exchange for that safety.

 

A good choice for

Investors who would rather opt for safe investments albeit the lower returns.

 

 

6. Unit Trust funds

 

Unit trust funds or mutual funds have been a popular investment tool for a while now.

 

Unit trust funds collect money from a number of investors and invest it in a variety of securities. Every fund has an objective that outlines its risk profile and investing purpose.

 

Unit trust funds provide diversified holdings across a wide range of sectors or asset classes and are an excellent method to steer clear of some of the difficult choices associated with stock investing.

 

Although administrative costs are still charged by unit trust funds, the cost of trading is shared among all investors, which lowers the cost per person.

 

A good choice for

Investors with a long-term investment horizon. Unit trust funds are a practical method to have access to the higher investing returns of the stock market without needing to own and maintain a portfolio of individual equities.

 

 

7. Index funds

 

index funds on paper

 

Index funds, which are mutual funds that are passively managed, aim to mimic the performance of an investment index, such as the S&P 500 or the Dow Jones Industrial Average. In other words, when you purchase shares in an index fund, you combine your funds with those of other investors, just as with other mutual funds.

 

There are index funds for practically every market and investing strategy you can imagine, with the S&P 500 being probably the most well-known of them all. You may purchase index funds directly through a provider, such as Vanguard, or via your trading account.

 

Young investors with a long time horizon may benefit most from index funds since they can devote more of their portfolio to higher-returning stock funds than to more conservative products like bonds.

 

When you invest in an index fund, you obtain a variety of assets in one simple, affordable transaction. The exposure to hundreds of stocks offered by certain index funds reduces your total risk through thorough diversification and you may create a portfolio that fits your preferred asset allocation by investing in a number of index funds that track various indices.

 

A good choice for

Long-term savings objectives due to the lower risk volatility.

 

 

8. Exchange Traded Funds (ETFs)

 

Consider ETFs as vessels that carry a variety of assets, such as stocks and bonds.

 

Due to the many assets that make up ETFs, they provide investors with immediate diversification. Investors spread their funds across a variety of investments when they buy a share of an ETF. Contrast this to stocks, where you purchase shares of only one corporation.

 

For more details on EFTs and how to get invested in them as a beginner, check out the guide from The Motley Fool.

 

A good choice for

Additionally, because an ETF share value may be less than a unit trust fund minimum, ETFs are the best option for investors who lack the funds necessary to fulfill the unit trust fund’s minimum investment criteria.

 

 

9. Dividend stocks

 

The term “dividend stocks” refers to businesses with a strong track record of paying out earnings as dividends to their shareholders. These businesses are well-established and prominent in their respective fields. To get you started, here are 25 High-Dividend Stocks And How To Invest In Them.

 

A good choice for

Investors are advised to research dividend producers, which are businesses with a proven track record of steadily raising their dividend payments. These businesses might not now offer large yields, but if their dividend growth continues, they might in the future.

 

 

10. Cryptocurrencies

 

cryptocurrencies coin

 

Cryptocurrency is the last option on this list because it is an extremely volatile investment, making it one of the investment ideas with the highest risk.

 

If you’re ready to acknowledge that investing in cryptocurrency is a high-risk bet with a potential for success but also that you run the very real risk of losing all of your money, this could be a great option. If you’re interested in Bitcoin, check out our full beginner’s guide to investing in Bitcoin.

 

The market for cryptocurrencies and blockchain technology is expanding. Financial infrastructure for the crypto world that is desperately required is constantly being created, and institutional-grade custodial services are becoming more accessible to investors. Just take a look at the explosion of apps and services such as crypto wallets and crypto exchanges, and the growing amount of jobs that pay in Bitcoin.

 

Futures markets for cryptocurrencies are emerging, and several businesses are getting first-hand exposure to the industry. Meanwhile, financial behemoths like PayPal are facilitating bitcoin trading on their well-known platforms.

 

A good choice for

Future-looking investors who fully understand the risks of this volatile market.

 

 

Wrap Up – Smart investing starts with research

 

As always, diversification is key. Your investment returns will be more uniform if you divide your funds among several investment options.

 

It all starts with research and only you know your risk tolerance and your financial goals. Hopefully, this article will help you navigate some of the most relevant investment ideas and select the ones that are suitable to you. And remember – always conduct thorough research before following the next best investment trend (remember NFTs?).

 

Be a smart investor, your future self will thank you for it!

 

 

Regiena Regunathan

About The Author

Regiena is a full-time banker and passionate content writer. She loves all things books and coffee-related and finds solace in being tucked away with either.