What is the best place to invest your money?
You have probably asked this question as you begin to accumulate more money.
Most people are stuck in the mentality of simply putting their money into a savings or checking account.
It’s great to build an emergency fund but at some point, you will want to invest your money.
Diversifying your investments and diversifying your portfolio will be key.
Table of Contents
Investing in a Savings Account
- Stock Market
- Real Estate – Rental Properties
- Real Estate Crowdfunding
- Art is a great investment.
- Peer to Peer Lending
- Investing in yourself is a side hustle
Where do I invest my money now?
What I intend to invest in the near future
Investing in a Savings Account
If you’re anything like one of my banks, you get almost no interest on your savings account.
Look at my screenshot from the bank, baby! It’s time to retire!
Savings account interest
Some banks pay less than 1% on interest.
CNN Money reports that “the average savings account pays a paltry 0.06% annual percentage yield (or interest) and many of the country’s largest banks pay rates down to 0.01%.”
Yikes!
It is still a good idea to put a percentage of your income into an account every month or each time you get paid. You can use this money to pay for any unexpected bills or emergencies.
You can also choose from a variety of high-yielding online bank accounts.
If you want to invest your money and earn more money, then you should consider places where you will get a higher return.
Do your research before investing and avoid going “all-in” on a particular investment.
If you want to build wealth and feel more secure, then the places below could be a good place to begin.
The following are listed in no particular sequence.
Also, I will share with you where I have currently spent my money and what I plan to do in the near future.
- Stock Market
Stock market is the most obvious and common place to put your money. You can invest in a brokerage, 401k, IRA, or individual shares of companies.
Let’s take a look at these a little further.
Brokerage Account
A brokerage account is a contract between you, the investor, and a brokerage firm that allows the investor to place orders for stocks and bonds and deposit money with the brokerage.
Many people invest in money market funds, such as Vanguard. It works just like a savings account. It takes a few extra days for the money to be transferred back to your account if you don’t need it immediately.
If you want to invest in index funds that offer tax advantages to increase your returns, or if you’re looking for a way to get more interest from your money, then this is a good place to begin.
401ks & IRA’s
You can choose from your company’s plan, your 401k if self-employed, a traditional IRA, or a Roth IRA. Each has slightly different caveats but they are all for your future retirement. One of the best ways to prepare for your retirement is to have a plan and put a certain percentage of your money into an account.
There is plenty of information available online about each and their differences. It’s still important to earn 6-8% of your money in order to secure your future.
Individual Stocks
I do not think that most people should be investing in individual stocks. If you want to make money quickly, this will usually lead to disaster. But I don’t completely oppose picking a few. Only if you can afford to lose the money.
This is no more than 1% of my available cash. Even if I lose it, l can still eat and pay rent.
For those who are new to investing, it is best not to pick individual stocks. Focus on index funds with low expenses to diversify your money and make it easier for you.
529 Plan
A 529 plan is another way to invest money if you’re starting a family or planning to have children. It is a tax-advantaged saving plan designed to encourage people to save for future educational costs. You will find some rules and regulations here, so I recommend you read it if this is something that interests you.
Rental property
- Real Estate – Rental Properties
What do all the money books I’ve ever read have in common?
Each of them has emphasized the importance of investing in real estate as a way to build wealth.
Real estate investment, particularly for rental properties, can be overwhelming to a novice, but it can also build incredible wealth for the future.
The value of property usually increases, even though the real estate market might have occasional recessions.
Rental properties are time-consuming and require a lot work. Renting out rooms, or renovating and reselling the property can be a great way to make money.
Gary Keller’s massive book, The Millionaire Real Estate Investor is a must-read for anyone interested in real estate. This is a massive book that you should have in your library if you’re serious about real-estate.
- Real Estate Crowdfunding
Real estate crowdfunding websites are an option for those who don’t yet have the knowledge or money to invest in real estate.
You can invest in real-estate properties and receive a return when the project is completed or sold. Investors may also receive monthly dividends, depending on the loan you take out.
This was usually only for accredited investors, but this has changed.
There are more platforms that allow others to diversify their assets. Three platforms that I have done my research, invested in myself and have friends who invest include:
Groundfloor has recently opened its loans to all 50 states, including the platform that I am currently using. I’ve enjoyed using their platform and it is a good way to get into real estate.
Fundrise is one of the most popular names, but I have decided not to invest in it at this time. Some of my friends have invested here and are happy with their returns.
DiversyFund: DiversyFund allows you to invest as little as $500 in commercial real estate fund. They are relatively new but also the only platform that does not charge fees!
This article will give you more information about the real estate crowdfunding.
- Art is a great investment.
People have been interested for many years in investing in art.
Investing in current artists is difficult because you don’t really know how well they will do in the future. The popularity and taste of an artist can change or fade.
You are unlikely to win if you buy famous names such as Van Gogh and Warhol, which would cost millions of dollars.
You can only choose art that you love, value, and know something about the artist.
Someone came up with a great idea, similar to crowdfunding for real estate. It allows you to buy and sell shares on famous works of art using the blockchain. The business is brand new, and it’s currently being reviewed by the SEC.
Masterworks is the company and I believe they’re on to something. This is still a new venture, and I wouldn’t recommend putting a lot of money into it.
Invest in art
For as little as a few hundred dollars, you can own a few pieces of Andy Warhol or Claude Monet.
I do not currently have any money invested in this company, but I am watching it closely and I have put it on my list of future investments that I would like to make.
- Peer to Peer Lending
Online services match lenders and borrowers.
Borrowers can get money at lower rates of interest, and lenders can earn more than banks on their savings products.
The borrower may default on loans obtained through peer-to-peer lending websites. According to what I have seen, returns are usually not higher than 3-8 percent but it could be worth a try.
Popular P2P sites include:
LendingClub
Prosper
Upstart (founded by former Googlers)
- Investing in yourself is a side hustle
This is a statement that you may think is cliche, but it has to be made.
You are the best investment you can make.
This means starting an online business or side hustle with the potential to earn you more money in the future.
Like any other investment, starting or investing in your own business can be a risky venture. However, it could also be one of the best investments you ever make.
How many times have others started something with a few thousand dollars and ended up making thousands of dollars? Or sold the business for a nice chunk change?
You will never know what you are capable of if don’t invest yourself.
Where do I invest my money now?
When I first started to take my finances more seriously, I was also wondering what and where I should invest my money.
I created a budget spreadsheet to show me exactly where my money went and how much I still had left.
The money I had saved was what I used to start figuring out how to spend it.
My salary, savings, and general financial knowledge have all grown since I started this job.
Currently, I spend about 40% of my earnings on bills and student loans. I can now save about 60% of my income.
I am aware that this is a much higher rate of savings than the average (which is less than 5%), but I have also worked hard to reach where I am today.
Here is a rough breakdown of my current savings and investments based on a percentage.
Stock Market – 60%
It includes my Roth IRA, as I don’t have a 401k from my company.
Brokerage accounts offer higher returns on investment and tax-advantaged money
Stocks (which is about 2% of the total amount I have)
Save 20%
I’m also building my savings account, as the majority of this money is going to be used for investing outside of stock markets. But until I feel more secure and have enough money saved, I won’t be mindlessly investing in anything else.
Real Estate Crowdfunding – 10%
I have chosen to invest in real estate crowdfunding with Groundfloor. I divert a small portion of my investment money to loans that offer 9% returns or more. This is a relatively new area for non-accredited investment, but it’s also a great way to diversify and earn decent returns.
What I intend to invest in the near future
You can see that I am not yet fully diversified when it comes time to invest, but I am getting there.
The main reason I am saving is because I want to pay off my debt and build up my stock market portfolio.
I will be investing more in real estate crowdfunding.
Though real estate investment is something I am interested in, I don’t feel confident or knowledgeable enough to do it.
Real estate crowd funding makes it easier for me to manage rental properties. Some of my friends have invested in Groundfloor, and they have seen returns between 9-11%.
Moreover, I will continue to save money in my Roth IRA as well as in my brokerage account.
