The Best Place To Invest Money; 3 Ways

The best place to invest money at any given time will depend on your financial goals. This includes both how long you want to invest and how much risk you are willing to take on. Typically, the longer you plan to leave your money in the markets, the more risk you can shoulder. Before parking your money anywhere, you need to decide if your plans include short term, middle range, or long-term investments.

Where to Invest for the Short-Term

Short-term money plans are usually those made for a period of 0 to 3 years. When you only have this much time to grow your money before you need to use your principal, the best plan is to stay away from risky options and put your money into accounts with guaranteed returns. You certainly will not make as much with these funds but your original capital will be safe and available when you need it.

The most basic way to earn money for the short term is to simply keep it in a savings account. This puts money at your fingertips whenever you need it, but you still get to earn a little interest in the meantime.

For slightly higher interest rates, you can put your money in a money market account. This is basically a savings account, but minimum balances are required (sometimes in the range of $1,000 to $2,500) and only a few withdrawals are permitted each month.

Certificates of Deposit (CDs) are another short-term earning tool that offers slightly higher interest rates than savings accounts, although you cannot touch your money until the CD term is up. Terms can be as short as 3 or 6 months, but the longer the term, the higher the returns.

Other relatively safe short-term investments include short-term high-grade municipal bonds. These are bonds issued by state and local governments and they offer tax benefits to those buying them in-state. The interest rates may or may not be much different from CD rates, depending on the state of the economy. Make sure that you buy only muni bonds issued by well-rated agencies.

Medium-Range Investing

Investing for the mid range usually means somewhere between 3 and 10 years. If you are planning to leave your money in the markets for the longer end of this range you can start to take on some slightly riskier options like stocks and bonds, but it is a good idea to keep a good portion of your money in safe accounts as well.

One type of bond to consider is a zero coupon bond. These are issued by corporations, the federal government, and state and local groups. Zero coupon bonds pay no interest until their maturity date, generally 10 years or longer, but you buy them at a deeply discounted rate from their eventual value.

Long-Term Investments

For money that can stay put for 10 or more years, there is much more flexibility. One basic plan for the long-term is to contribute to a 401(k) or 403(b) matching retirement plan offered by your employer. This automatically doubles the size of your capital.

Another good long-term choice is a Roth IRA (individual retirement account). You only pay taxes on the money you put in and you can choose the types of stocks and bonds that you want.

Mutual funds, either indexed or actively managed, can also be smart when you have a decade or more to before you need to pull out your money. These funds buy a variety of stocks and bonds and other options, and spread the risk and profits out among all those who buy into the fund.

Purchasing certain stocks directly can also pay off big after many years, but only as long as you pick the right ones. The stock market on average, however, has offered the best long-term returns of any investment vehicle to date.
Whether you invest for a few years, a decade, or much longer, choosing the right type of funds for your goals will ensure that you make the most of your money.

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