10 best investments in 2024
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Inflation has come down so far this year and the Federal Reserve cut interest rates in September for the first time since 2020. The central bank is hoping to navigate a “soft landing” for the economy. Although, a slowing economy could still lead to a recession. Whichever way it goes, you may have some opportune places to invest, especially if you’re thinking long term.
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Benefits of investing
Investing can provide you with another source of income, fund your retirement or even get you out of a financial jam. Above all, investing grows your wealth — helping you meet your financial goals and increasing your purchasing power over time. Or maybe you’ve recently sold your home or come into some money. It’s a wise decision to let that money work for you.
While investing can build wealth, you’ll also want to balance potential gains with the risk involved. And you’ll want to be in a financial position to do so, meaning you’ll need manageable debt levels, have an adequate emergency fund and be able to ride out the ups and downs of the market without needing to access your money.
There are many ways to invest — from safe choices such as CDs and money market accounts to medium-risk options such as corporate bonds, and even higher-risk picks such as stock index funds. That’s great news because it means you can find investments that offer a variety of returns and fit your risk profile. It also means that you can combine investments to create a well-rounded and diversified — that is, safer — portfolio.
So, what are the best investments for this year? The list below starts with some safer picks and then moves on to those that should deliver higher returns but may be more volatile, giving you a healthy mix of growth and safety during what looks like a tough-to-predict market environment.
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Overview: Best investments in 2024
1. High-yield savings accounts
Overview: A high-yield online savings account pays you interest on your cash balance. And just like a savings account at your brick-and-mortar bank, high-yield online savings accounts are accessible vehicles for your cash.
Who are they good for? A savings account is a good vehicle for those who need to access cash in the near future. A high-yield savings account also works well for risk-averse investors who want to avoid the risk that they won’t get their money back.
2. Long-term certificates of deposit
Overview: Certificates of deposit, or CDs, are issued by banks and generally offer a higher interest rate than savings accounts. And long-term CDs may be better options when you expect rates to fall, allowing you to keep your money earning higher rates for years.
Who are they good for? Because of their safety and higher payouts, CDs can be a good choice for retirees who don’t need immediate income and are able to lock up their money for a little bit.
A CD works well for risk-averse investors, especially those who need money at a specific time and can tie up their cash in exchange for a bit more yield than they’d find on a savings account.
3. Long-term corporate bond funds
Overview: Corporations sometimes raise money by issuing bonds to investors, and these can be packaged into bond funds that own bonds issued by potentially hundreds of corporations.
Long-term bonds have an average maturity of 10 years or longer, making them a better choice when interest rates are falling, as they’re expected to do in 2024.
Who are they good for? Corporate bond funds can be an excellent choice for investors looking for cash flow, such as retirees, or those who want to reduce their overall portfolio risk but still earn a return. Long-term corporate bond funds can be good for risk-averse investors who want more yield than government bond funds.
4. Dividend stock funds
Overview: Dividends are portions of a company’s profit that are paid out to shareholders, usually on a quarterly basis. So, dividend stocks are those stocks that offer a cash payout — and not all stocks do — while a fund packages up only dividend stocks into one easy-to-buy unit.
Who are they good for? Buying individual stocks, whether they pay dividends or not, is better suited for intermediate and advanced investors. But you can buy a group of them in a stock fund and reduce your risk. Dividend stock funds are a good selection for almost any kind of stock investor but can be better for those who are looking for income. Those who need income and can stay invested for longer periods may find these attractive.
5. Value stock funds
Overview: These funds invest in value stocks, those that are more bargain-priced than others in the market.
Who are they good for? When stocks run up in valuation as they do from time to time, many investors wonder where they can put their investment dollars. Value stock funds may be a good option. Value stock funds are good for investors who are comfortable with the volatility associated with investing in stocks. Investors in stock funds need to have a longer-term investing horizon, too, at least three to five years to ride out any bumps in the market.
6. Small-cap stock funds
Overview: These funds invest in small-cap stocks, which are the stocks of relatively small companies. Small caps often have strong growth prospects, and many of the market’s largest companies were once small caps, so the potential gains can be significant. A small-cap fund packages dozens or even hundreds of small caps into a single, easy-to-buy unit.
Who are they good for? Small-cap funds are appropriate for investors looking for attractive long-term returns and who are able to stay invested in them for at least three to five years, riding out volatility along the way. Because these funds are comprised of stocks, they’ll fluctuate much more than safer kinds of investments.
7. REIT index funds
Overview: A real estate investment trust, or REIT, is one of the most attractive ways to invest in real estate. REITs pay out dividends in exchange for not being taxed at the corporate level, and REIT index funds pass those dividends along to investors. Publicly traded REIT funds can include dozens of stocks and allow you to buy into many sub-sectors (lodging, apartments, office and many more) in a single fund. They’re a good way for investors to get diversified exposure to real estate without worrying about the headaches of managing the property. After some hard years for REITs amid rising rates, it may be time for them to shine in 2024.
Who are they good for? REIT index funds pay out substantial dividends, making them an attractive place for income-focused investors, such as retirees. But REITs also tend to grow over time, so there’s some potential for capital appreciation, too. Prices of publicly traded REITs can fluctuate markedly, so investors need to take a long-term focus and be willing to deal with the volatility.
8. S&P 500 index funds
Overview: An S&P 500 index fund is based on about five hundred of the largest American companies, meaning it comprises many of the most successful companies in the world. For example, Amazon and Berkshire Hathaway are two of the most prominent member companies in the index.
Who are they good for? If you want to achieve higher returns than more traditional banking products or bonds, a good alternative is an S&P 500 index fund, though it does come with more volatility. An S&P 500 index fund is an excellent choice for beginning investors because it provides broad, diversified exposure to the stock market. An S&P 500 index fund is a good choice for any stock investor looking for a diversified investment and who can stay invested for at least three to five years.
9. Nasdaq-100 index funds
Overview: An index fund based on the Nasdaq-100 is a great choice for investors who want to have exposure to some of the biggest and best tech companies without having to pick the winners and losers or having to analyze specific companies.
The fund is based on the Nasdaq’s 100 largest companies, meaning they’re among the most successful and stable. Such companies include Apple and Alphabet, each of which comprises a large portion of the total index. Microsoft is another prominent member company.
Who are they good for? A Nasdaq-100 index fund is a good selection for stock investors looking for growth and willing to deal with significant volatility. Investors should be able to commit to holding it for at least three to five years. Using dollar-cost averaging to buy into an index fund can help reduce your risk, compared to buying in with a lump sum.
10. Rental housing
Overview: Rental housing can be a great investment if you have the willingness to manage your own properties. To pursue this route, you’ll have to select the right property, finance it or buy it outright, maintain it and deal with tenants. You can do very well if you make smart purchases. With housing prices cooling off recently, a strategic purchase of real estate could work out well in the long term, especially as interest rates topped out in 2023.
Who are they good for? Rental housing is a good investment for long-term investors who want to manage their own properties and generate regular cash flow.
Recent news on investments
Stocks have seen strong performance so far in 2024, with the S&P 500 up more than 20 percent through October, as investor optimism about interest rate cuts by the Fed and the boom in artificial intelligence spending has propelled stocks to new highs. Income-focused investors are looking to lock in interest rates before the Fed starts lowering them further.
Investors looking for more attractive long-term returns are still looking at stocks. However, the situation may be more risky with stocks trading near all-time highs. So those just stepping into the market now may want to consider how to invest with stocks near their peaks.
Experts in the latest Bankrate Market Mavens survey still see the market inching higher over the coming 12 months.
What to consider before you start investing
As you’re deciding what to invest in, you’ll want to consider several factors, including your risk tolerance, time horizon, your knowledge of investing, your financial situation and how much you can invest.
If you’re looking to grow wealth, you can opt for lower-risk investments that pay a modest return, or you can take on more risk and aim for a higher return. There’s typically a trade-off in investing between risk and return. Or you can take a balanced approach, having absolutely safe money investments while still giving yourself the opportunity for long-term growth.
The best investments for 2024 allow you to do both, with varying levels of risk and return.
Bankrate Staff Insight
“It’s important to make sure you match your investments with your financial goals. Stocks are a great choice for long-term goals, but their volatility makes them risky in the short term. Bonds may be safer in the near term, but are unlikely to generate returns that will help you reach long-term goals such as retirement.” – Brian Baker, CFA, Bankrate Investing and Retirement Senior Writer
Risk tolerance
Risk tolerance means how much you can withstand when it comes to fluctuations in the value of your investments. Are you willing to take big risks to potentially get big returns? Or do you need a more conservative portfolio? Risk tolerance can be psychological as well as simply what your personal financial situation requires.
Conservative investors or those nearing retirement may be more comfortable allocating a larger percentage of their portfolios to less-risky investments. These are also great for people saving for both short- and intermediate-term goals. If the market becomes volatile, investments in CDs and other FDIC-protected accounts won’t lose value and will be there when you need them.
Those with stronger stomachs, workers still accumulating a retirement nest egg and those with a decade or more until they need the money are likely to fare better with riskier portfolios, as long as they diversify. A longer time horizon allows you to ride out the volatility of stocks and take advantage of their potentially higher return, for example.
Time horizon
Time horizon simply means when you need the money. Do you need the money tomorrow or in 30 years? Are you saving for a house down payment in three years or are you looking to use your money in retirement? Time horizon determines what kinds of investments are more appropriate.
If you have a shorter time horizon, you need the money to be in the account at a specific point in time and not tied up. And that means you need safer investments such as savings accounts, CDs or maybe bonds. These fluctuate less and are generally safer.
If you have a longer time horizon, you can afford to take some risks with higher-return but more volatile investments. Your time horizon allows you to ride out the ups and downs of the market, hopefully on the way to greater long-term returns. With a longer time horizon, you can invest in stocks and stock funds and then be able to hold them for at least three to five years.
It’s important that your investments are calibrated to your time horizon. You don’t want to put next month’s rent money in the stock market and hope it’s there when you need it.
Your knowledge
Your knowledge of investing plays a key role in what you’re investing in. Investments such as savings accounts and CDs require little knowledge, especially since your account is protected by the FDIC. But market-based products such as stocks and bonds require more knowledge.
If you want to invest in assets that require more knowledge, you’ll have to develop your understanding of them. For example, if you want to invest in individual stocks, you need a great deal of knowledge about the company, the industry, the products, the competitive landscape, the company’s finances and much more. Many people don’t have the time to invest in this process.
However, there are ways to take advantage of the market even if you have less knowledge. One of the best is an index fund, which includes a collection of stocks. If any single stock performs poorly, it’s likely not going to affect the index much. In effect, you’re investing in the performance of dozens, if not hundreds, of stocks, which is more a wager on the market’s overall performance.
So you’ll want to understand the limits of your knowledge as you think about investments. (Here’s how to research stocks like the pros.)
How much you can invest
How much can you bring to an investment? The more money you can invest, the more likely it’s going to be worthwhile to investigate higher-risk, higher-return investments.
If you can bring more money, it can be worthwhile to make the time investment required to understand a specific stock or industry, because the potential rewards are so much greater than with bank products such as CDs.
Otherwise, it may not simply be worth your time. So, you may stick with bank products or turn to ETFs or mutual funds that require less time investment. These products can also work well for those who want to add to the account incrementally, as 401(k) participants do.
Bottom line
Investing can be a great way to build your wealth over time, and investors have a range of investment options, from safe lower-return assets to riskier, higher-return ones. That range means you’ll need to understand the pros and cons of each investment option and how they fit into your overall financial plan in order to make an informed decision. While it seems daunting at first, many investors manage their own assets.
But the first step to investing is actually easy: opening a brokerage account. Investing can be surprisingly affordable even if you don’t have a lot of money. (Here are some of the best brokers to choose from if you’re just getting started.)
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
