13 Best Investments You Can Make Right Now
Trying to pick the one or two investments that will make you the most money right now can feel like a fool’s errand. After all, if we fall into recession, as some experts say we still might, the economic landscape will be quite different than if the Federal Reserve stops raising rates, inflation retreats and the economy continues to recover strongly. Since no one can predict which scenario will play out over the next 12 months, it’s best to consider a variety of investments that collectively can provide you with income, safety and the potential for growth.
See: 3 Things You Must Do When Your Savings Reach $50,000
What Are the Best Investments for 2023?
If you’re on the lookout for investment opportunities, here’s a look at 13 of the best investments you can consider for your portfolio:
High-yield savings accounts
High-yield certificates of deposit
Series I savings bonds
Short-term corporate bond funds
Nasdaq-100 Index funds
S&P 500 index funds
Value stock funds
Dividend stock funds
Diversified growth stock funds
Real estate investment trusts
Rental properties
Recent S&P 500 losers
Momentum stocks and ETFs
1. High-Yield Savings Accounts
A high-yield savings account pays higher-than-average interest rates, so your money grows faster than it would in a traditional savings account paying average rates. The account is fully liquid, meaning you can withdraw your money whenever you want. Although you can find high-yield savings accounts at brick-and-mortar banks like CIT and Capital One, online banks and credit unions typically pay the highest rates.
Why We Like Them
For more conservative investors, there’s rarely been a better time to keep your money in a high-yield savings account than now. With the Fed aggressively raising interest rates to keep inflation in check, high-yield savings yields have skyrocketed. Whereas rates on even the best high-yield savings accounts were about 0.50% in 2020, now you can find accounts paying 5% or even more. That’s a pretty high yield for an insured savings account, considering that the average savings account rate is just 0.46% as of Oct. 16, making it a good place to hide if you’re worried about more stock market sell-offs in 2023.
What To Watch Out For
Your money is safe in a high-yield savings account — there’s no chance of losing your principal up to the coverage limit or the interest it earns even if the bank fails, because your accounts are insured for up to $250,000, and some banks offer even more insurance than that. However, savings accounts of all types carry inflationary risk, which is a loss of purchasing power due to inflation. The inflation rate is 3.7% as of September, so your account needs to yield at least that much to retain its purchasing power.
2. High-Yield Certificates of Deposit
A certificate of deposit is a type of savings account that locks up your funds for a certain period of time ranging from one month to 10 years. In return, the bank or credit union pays a predetermined fixed rate of interest on your balance. You receive your principal plus interest when the CD matures, at which time you can withdraw your money or roll it over into a new CD.
Why We Like Them
Certificates of deposit can pay more than high-yield savings accounts, and they carry the same FDIC insurance. Many come with shorter maturities, so you can get a guaranteed rate now and take advantage of higher rates upon maturity — or move your money if rates have dropped. Until the state of the economy and the market become more apparent heading into 2024, you may end up making more money by sitting and waiting in a high-paying CD, as CDs have seen increased yields thanks to the Fed’s campaign of increasing interest rates.
What To Watch Out For
CDs carry the same inflationary risk savings accounts do. They’re also less liquid — you’ll likely forfeit some or all of your interest if you withdraw your money before the CD matures.
3. Series I Savings Bonds
Series I bonds are a type of savings bond that’s structured to eliminate the risk that inflation will rob the bond of spending power. The bonds are issued at face value with a 20-year original maturity period followed by a 10-year extended maturity period. They have a composite rate with two parts: a fixed rate, which stays the same for the entire term, and an inflation rate that changes as often as every six months relative to the inflation rate.
Why We Like Them
While I bond rates are down from the 9.62% composite rate that made headlines in 2022 — a composite made up of a 9.62% inflation rate and a 0% fixed rate — the rate is still a respectable 5.27% for bonds purchased in the six-month period spanning Nov. 1, 2023, to April 30, 2024. Granted, you could earn the same rate with a high-yield savings account or CD, but unlike those products, tax on Series I bond earnings can be deferred until after the 30-year final maturity or until the bonds are otherwise redeemed. Plus, they’re guaranteed to hold their value regardless of inflation rates.
What To Watch Out For
You can redeem a Series I bond as soon as one year after it’s issued, but you’ll forfeit interest earned during the most recent three months if you redeem it within the first five years. In addition, you might owe tax on your earnings.
4. Short-Term Corporate Bond Funds
A corporate bond is like an IOU. Companies issue them to generate cash they can use for a variety of purposes, such as expanding, investing in equipment, paying shareholder dividends or buying back shares of their stock. By purchasing bonds, investors essentially loan the company money in exchange for the company’s obligation to pay the investors interest on their principal and, in most cases, pay back the principal when the bond matures.
Bonds and the companies that issue them receive credit ratings based on their risk of defaulting on their obligations to bondholders. Investment-grade bonds have stronger credit ratings and are safer than non-investment-grade bonds. Whichever type you choose, investing in a bond fund is less risky than investing in individual bonds of the same type because funds have built-in diversity — a small number of companies in a fund might default, but it’s unlikely that all will.
Why We Like Them
A short-term bond fund may not offer a huge amount of upside, but protecting you from the potential downside of the stock market may end up being the winning move. Short-term bond funds provide a modest amount of income in exchange for the security of getting your money back at maturity.
What To Watch Out For
Bonds are generally low-risk, but not as low-risk as savings accounts and CDs. Like those products, bonds have inflationary risk that can erode their purchasing power. They also have interest rate risk — the risk that rates will increase while your money is tied up on the bond. And some bonds allow the company to call them back before the maturity date, which might cause you to miss out on the rate you expected to earn on your investment.
5. Nasdaq-100 Index Funds
One hundred of the largest nonfinancial companies on the Nasdaq Stock Market make up the Nasdaq-100 Index. A Nasdaq-100 fund tracks the index and attempts to replicate its returns.
Why We Like Them
Over the last 20 years, the companies that make up the Nasdaq-100 Index have outperformed the S&P 500, producing a 20.41% annualized increase in earnings, a 12.46% increase in revenue and a 24.93% increase in dividend value. As of Nov. 12, the price-earnings ratio has decreased nearly 7% on an annualized basis, which could indicate that index funds are well priced.
The Nasdaq-100 Index is more volatile than the broader market, which accounts in part for its larger loss in 2022 than the Dow Jones Industrial Average or the S&P 500 index. But when the Nasdaq bounces, it typically comes back hard and fast.
What To Watch Out For
The Nasdaq composite index took the brunt of the bear market in 2022, dropping 33%. It has regained most of those losses, but you’ll still need a high tolerance for risk to invest in a Nasdaq-100 Index fund.
6. S&P 500 Index Funds
The S&P 500 index includes the 500 leading U.S. stocks. It’s widely regarded as a barometer of the overall market because it covers all sectors of the stock market, about 80% of U.S. market capitalization and 50% of the global equity market, according to S&P Global.
Why We Like Them
The S&P 500 — like every other major market index — has never failed to come back from a bear market and make new all-time highs. Although past performance can’t predict future results, this is an enviable track record and makes an S&P 500 ETF investment a solid long-term bet. Recovery may not be complete in 2023, but over the long run, stocks tend to go up, not down, so buying when the index is down can be a good strategy.
What To Watch Out For
A small number of companies can have a disproportionately large influence on the index. As of June, for example, the top 10 companies accounted for as much as 35% of the total index market cap, according to E-Trade. So although S&P 500 index funds are less risky than individual stocks and funds that focus on specific sectors of the market, they might be less diverse than you realize.
7. Value Stock Funds
Value stock funds hold shares in companies Fidelity calls “diamonds in the rough” — those with stock prices that don’t reflect the companies’ fundamental worth. The thinking is that prices will appreciate as investors discover the companies’ value. As a bonus, many value stocks tend to pay relatively high dividends.
Why We Like Them
Growth stocks fell out of favor in 2022, making value stocks the place you wanted to be. Although growth stocks recovered faster in the first half of 2023, they since have lost their edge. What’s more, value stocks tend to outperform during economic recoveries, according to an analysis by Vanguard. If the U.S. avoids a recession, the economy’s next move could be an acceleration that could bolster value shares.
What To Watch Out For
It’s too early to know whether the Fed has pulled off the “soft landing” that would support stronger performance for value stocks.
8. Dividend Stock Funds
Dividend stocks — many of which also happen to be value stocks — return a portion of earnings to shareholders. The benefit of holding these stocks is that you earn income (dividends) whether or not the share price appreciates. Dividend Aristocrats are companies that have increased their dividends for at least 25 years in a row.
Why We Like Them
In times of economic uncertainty, companies that pay high dividends tend to hold up better. To consistently pay a high dividend, a company needs a consistent revenue stream, and these are the types of businesses that investors value when the economy slows. Owning a fund of dividend stocks — especially Dividend Aristocrat stocks — is a good way to diversify your holdings, earn a solid income and protect yourself from the more volatile areas of the stock market.
What To Watch Out For
Focusing too much on dividend yields can be counterproductive. Look at the fund’s total returns as well as its suitability for your investing goals and risk tolerance.
9. Diversified Growth Stock Funds
Growth stocks appreciate faster than the average stock, so they can earn you high investment returns. The companies behind them tend to be newer, innovative companies such as Netflix and Nvidia.
Why We Like Them
Growth stocks got hammered last year, and their spectacular recovery in the first half of 2023 has slowed. However, if you can stick with a diversified stock fund that owns high-quality growth names, that investment is likely to continue bouncing back over time. Diversifying via a mutual fund or ETF is a good way to lower your risk instead of betting everything on a single stock.
What To Watch Out For
Growth stock prices are relatively expensive, so they can fall hard when they don’t produce the gains investors expect.
10. Real Estate Investment Trusts
Real estate investment trusts use investor funds to buy various types of property, managed by professionals, with the income passing through to shareholders. The law requires REITS to distribute at least 90% of the income generated by their investments back to investors.
Why We Like Them
REITs provide real estate investment opportunities that don’t require you to either manage it yourself or put up a massive down payment. Publicly traded REITs are relatively easy to trade on public exchanges, so they’re considered to be highly liquid. What’s more, dividends are typically high and volatility is often less than the stock market overall, giving you a bit of a hedge if there’s another tough market year ahead.
What To Watch Out For
SEC-registered non-traded REITs — those not traded on public stock exchanges — and private REITs are riskier, less liquid and can have higher fees than publicly traded REITs. Be especially cautious with private REITs, which are not regulated by the Securities and Exchange Commission.
11. Rental Properties
To diversify your investments away from the stock and bond markets, a rental property might provide a good investment opportunity for 2023.
Why We Like Them
Although the housing market is softening, rents remain strong, and once interest rates and inflation begin to cool a bit, there may be more support for home prices as well. Rental properties can be a good long-term investment because you’ll receive a predictable income stream that will only rise over time, helping combat inflation. You may also benefit from long-term capital gains over time.
What To Watch Out For
Owning and managing rental properties is more time-consuming and more expensive than many investors realize. You’ll need significant capital beyond the purchase and initial maintenance costs, both to carry you through vacancies and cover the cost of unexpected repairs.
12. Recent S&P 500 Losers
With a little research, you might be able to pick through the carnage wrought by 2022 and the mid-2023 correction that erased roughly half the gains made in the first half of the year and find some solid bounce-back candidates in a list losers from the last year or two.
Why We Like Them
While some stocks at the bottom of the S&P 500 in terms of performance have long-term structural problems, others may just be the victims of bad press, bad earnings or a number of factors that may prove to be temporary.
What To Watch Out For
Some of the recent losers are losers for a reason. You’ll want to work with a financial advisor to comb through the wreckage to pick solid bounce-back candidates.
13. Momentum Stocks and ETFs
Momentum investors look for stocks and exchange-traded funds that are on upward trends over the past days or weeks, or even the last few months — and are likely to keep going up. One way to identify them is by looking at the percentage of stocks and ETFs trading within 10% of their 52-week high to find the best-performing ones, according to Fidelity. Then find the ones that have had steep gains in the last one to four weeks.
Why We Like Them
According to Fidelity, there’s plenty of evidence to support the theory that markets making new highs will make even higher highs. You’ll have to watch the market carefully for signs that your shares are about to fall, but with any luck, your gains will have been large enough to give you some wiggle room.
What To Watch Out For
Momentum investing involves trying to time the market, which is risky under the best circumstances and especially risky when the market is volatile. Having an exit strategy, such as a stop loss, can reduce the risk of major losses.
The Best Investing Strategies To Use Right Now
Knowing what to invest in is just one part of investing successfully. Knowing how to invest is important, too. That’s where investing strategies come into play.
Dollar-Cost Averaging
Dollar-cost averaging is a good strategy to help you make money. If you own stocks, many of them were likely down in 2022 and 2023, and adding regular amounts every month to your portfolio will allow you to lower the long-term average cost of what you own by buying more shares when prices are low. As the future of the stock market is uncertain in late 2023, consistently buying regular amounts can help protect you from any volatility in prices.
Buy-and-Hold Investing
You could do worse than to implement Berkshire Hathaway CEO Warren Buffett’s favorite strategy of buying stocks you intend to hold for the long term — and then holding them for the long term. While Buffett has unloaded shares not long after buying them, and he has changed weightings of long-held stocks over the years, Berkshire Hathaway’s portfolio is remarkably consistent.
Dividend Reinvestment
You’re probably familiar with the “miracle” of compound interest, where the interest you earn on your savings account balance results in exponential growth of your funds. Dividend reinvestment works the same way. If you don’t rely on your investment dividends to cover your living expenses, reinvesting them can significantly increase your returns over time.
Final Thoughts
The best investments for 2023 — and the best investing strategies — help you maximize your returns while managing risk, even in volatile markets. To give yourself the best chance for success, review your asset allocation to make sure your portfolio has a mix you’re comfortable with. If not, consider rebalancing your portfolio by selling assets you have too much of and replacing them with assets that will get your allocation back into sync. Just be wary of fees, especially if you’re investing in funds. Every dollar you pay out in fees reduces your gains — and increases your losses — by the same amount.
FAQ
The number of investment options available can be overwhelming. Here's what people are asking to try to sort them out.
What investments have the highest returns?
Stocks have provided the highest average annual returns over the long term — 10% per year, according to the Financial Industry Regulatory Authority.
What is the best investment to invest your money in?
That depends on many factors, including your financial situation, your investing goals and your tolerance for risk. An investor who can't afford to lose any of their investment, or who doesn't want to, might consider a high-yield savings account to be best. An investor with a high risk tolerance and money to spare might prefer growth stocks.
Where should I invest $100 right now?
If you don't yet have an emergency fund, you can use the $100 to start one in a high-yield savings account. Or consider an S&P 500 ETF for a riskier option with the potential for greater returns.
How can I double my money without risk?
If your employer offers a 401(k) and matches employee contributions, contributing up to the match limit will double your money. Put the money into a safe investment such as Treasury securities or a money market fund to all but eliminate risk.
John Csiszar contributed to the reporting for this article.
Information is accurate as of Nov. 12, 2023.
This article originally appeared on GOBankingRates.com: 13 Best Investments You Can Make Right Now
