10 Best Long-Term Investment Strategies for 2022

10 Best Long-Term Investment Strategies for 2022

In this guide, we’re going to present the 10 best long-term investment strategies for 2022. The reason we’re providing 10 is because there’s no single investment strategy that’s right for all investors, and in all investment environments.

By covering 10, we’re providing an opportunity to mix several strategies to provide the right combination of liquidity, safety, income and long-term growth. As a long-term investor, you’ll need to be focused on all four criteria to be successful.

The table below provides a quick summary of each of the 10 best long-term investment strategies for 2022, along with the main features and benefits of each. More detailed descriptions of each strategy will follow.

Investment / Features Minimum Investment Stability / Risk Level Liquidity Level Transaction Costs Where to Invest
Real Estate Typically 20% of the purchase price; as low as $10 with real estate crowdfunding High stability / moderate risk   Low Up to 10% of property sale; 2% – 3% for real estate crowdfunding Your local real estate market or Fundrise (real estate crowdfunding)
REITs The cost of one REIT share Low to moderate stability and risk High None Zacks Trade, E*TRADE, TD Ameritrade
Stock Funds ETFs, the cost of one share; mutual Funds, $1,000 and up  Low to moderate stability / moderate to high risk High ETFs, none; Mutual Funds, 0% – 3%  M1 Finance, Betterment, Zacks Trade, E*TRADE, and TD Ameritrade
Crypto-currencies $2 and up Low stability / high risk Moderate to high 0 to 5%, depending on crypto BlockFi, Crypto.com, Gemini, Coinbase, Robinhood
TIPS $100 High stability / low to moderate risk High None Treasury Direct
Gov’t Securities $100 High stability / low to moderate risk High None Treasury Direct
Traditional IRA Usually none, but some trustees may require $50 or $100 to open Very low to very high, depending on investment mix Limited due to tax consequences Generally, no transaction fees on common securities M1 Finance, Betterment, Zacks Trade, E*TRADE, TD Ameritrade
Roth IRA Usually none, but some trustees may require $50 or $100 to open Very low to very high, depending on investment mix High for contribution amounts; limited for investment earnings portion  Generally, no transaction fees on common securities M1 Finance, Betterment, Zacks Trade, E*TRADE, TD Ameritrade
High-Yield Savings $0 and up Very high stability / very low risk Very high None to $25 per month  Ally Bank, Discover Bank, Capital One 360, CIT Bank, Betterment
Long-term CDs $100 to $1,000 and up Very stable / very low risk Moderate, based on term of CD  None, but early withdrawal penalty equal to most interest paid PenFed, Ally Bank, Discover Bank, Capital One 360, CIT Bank

Below is our list of the 10 best long-term investment strategies for 2022. Please note that they are not ranked in any certain order. That’s because each investment strategy will apply in different economic and financial environments.

  • Real Estate: Best for Predictable Gains + Tax Benefits
  • Real Estate Investment Trusts (REITs): Best for Diversifying into Commercial Real Estate Investing
  • Stock Funds: Best for Long-term Growth
  • Cryptocurrencies: Best for Speculation
  • Treasury Inflation-Protected Securities (TIPS): Best for Secure Inflation Protection
  • Government Backed Securities: Best for Safety of Principal
  • Traditional IRAs: Best for Dedicated Retirement Planning
  • Roth IRAs: Best for Retirement Planning + Immediate Funds Access
  • High Yield Savings: Best for Liquidity with Interest Income
  • Long-Term CDs: Best for Locking-in Interest Rates

Now we’re going to discuss each of the 10 long-term investment strategies in greater detail. We’ve broken the strategies into two categories, over 5 years and 6 – 10 years. That’s because duration matters, even with long-term investment strategies.

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6 Best Investments Over 5 Years

Real Estate: Best for Predictable Gains + Tax Benefits

  • Minimum Investment: Typically, 20% of the purchase price; as low as $10 with real estate crowdfunding
  • Stability/Risk Level: High stability/moderate risk
  • Liquidity Level: Low
  • Transaction Costs: Up to 10% of property sale; 2% – 3% real estate crowdfunding fees
  • Where to Invest: Your local real estate market or Fundrise (real estate crowdfunding)

How to invest. The most obvious way is to invest in a primary residence. But you can also invest in rental real estate, or even commercial property. If you like the idea of investing in individual properties, but you don’t want to buy them directly, consider real estate crowdfunding. A platform like Fundrise can enable you to invest with as little as $10.

Benefits. Real estate has provided investment returns comparable to the stock market. Residential real estate produces average returns of 10.6%, while commercial property has returned an average of 9.5%. Rental property can be particularly advantageous, because it provides current income from rents, and long-term capital appreciation. Real estate also has valuable tax benefits, like depreciation expense.

Drawbacks. Purchasing rental real estate requires a substantial down payment, usually 20% of the purchase price. It’s also a very hands-on investment, requiring you to market the property, find tenants, and provide maintenance.

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Real Estate Investment Trusts (REITs): Best for Diversifying into Commercial Real Estate Investing

  • Minimum Investment: The cost of one REIT share
  • Stability/Risk Level: Low to moderate stability and risk
  • Liquidity Level: High
  • Transaction Costs: None
  • Where to Invest: Zacks Trade, E*TRADE, TD Ameritrade

How to invest. Many publicly traded REITs are listed on major stock exchanges. They can be purchased through investment brokerage firms, like those listed above. The minimum investment is the cost of one REIT share.

Benefits. REITs give you an opportunity to invest in real estate without taking direct ownership of property or managing it. It also gives you a chance to invest in commercial real estate, like office buildings, retail space, and large apartment complexes. The trust holds and manages the properties, giving you a diversified portfolio. And because REITs are required to pay out at least 90% of their income as dividends to their shareholders, REITs are an excellent source of regular income.

Drawbacks. A downturn in the economy could lead to a decline in commercial real estate rents and property values. That could result in reduced income and share value.

Stock Funds: Best for Long-Term Growth

  • Minimum Investment: ETFs, the cost of one share; mutual funds, $1,000 and up
  • Stability/Risk Level: Low to moderate stability / moderate to high risk
  • Liquidity Level: High
  • Transaction Costs: ETFs, none; Mutual Funds, 0% – 3%
  • Where to Invest: M1 Finance, Betterment, Zacks Trade, E*TRADE, and TD Ameritrade

How to invest. You can purchase shares in stock funds through the best online stockbrokers, some of which are listed above. You can decide to invest in either mutual funds or ETFs. Mutual funds are usually actively managed portfolios that attempt to outperform the market (though they seldom do). ETFs are more typically index funds. Rather than actively trading securities in the fund, they instead match the portfolio to an underlying index, like the S&P 500.

Benefits. As measured by the S&P 500 index, stocks have returned an average of 10% per year for the past 50 years. You can take advantage of that growth by investing in an ETF index fund tied to the S&P 500. ETFs also can be traded with no commissions, and for as little as the cost of one ETF share. And since they rarely trade stocks, the capital gains they generate will usually be long-term, giving you the benefit of lower long-term capital gains tax rates.

Drawbacks. The return of 10% is only an average, and not consistent from year to year. You may have certain years where you lose 20% or 30%. It’s completely a long-term play. Also, be aware that mutual funds require a minimum investment of at least $1,000, and often have load fees of between 1% and 3%.

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Cryptocurrencies: Best for Speculation

How to invest. The most common way to invest is through the best crypto exchanges, and we’ve listed a few above. But some investment brokers are also offering crypto, like Robinhood. That will give you an opportunity to invest in crypto on the same platform where you hold other assets.

Benefits. Crypto is considered to be an alternative asset that represents a diversification away from more traditional financial assets like stocks and bonds. Some people believe crypto is the next chapter in money, meaning it may one day replace traditional currencies. But thus far, the biggest benefit has been fantastic price increases that benefited those who got in early and sold near the top.

Drawbacks. Unlike most other assets, crypto is not backed by anything. That means no government backing, no banks, corporations, or physical assets. Also, price swings mean you can lose a lot of money if you buy near the top, and sell after a major decline.

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Treasury Inflation-Protected Securities (TIPS): Best for Secure Inflation Protection

  • Minimum Investment: $100
  • Stability/Risk Level: High stability / low to moderate risk
  • Liquidity Level: High
  • Transaction Costs: None
  • Where to Invest: Treasury Direct

How to invest. TIPS come in terms of five years, 10 years and 30 years. With as little as $100, you can invest through the US Treasury Department’s Treasury Direct web portal. There are no fees, and you can also redeem the securities on the same platform.

Benefits. TIPS are issued by the Treasury Department, which means they have the full backing of the US government. That means they’re theoretically impervious to default, and you will always be repaid your principal as long as the securities are held to maturity. Meanwhile, the Treasury adds to the principal value of the securities based on changes in the Consumer Price Index. In addition to inflation related principal additions, you also earn interest on the securities.

Drawbacks. The interest rate paid on TIPS is less than other Treasury securities of comparable terms. And while the principal value of the securities will be adjusted for inflation, it will only match it. You’ll never outperform inflation. Also, be aware that principal additions are considered taxable in the year paid.

Government-Backed Securities: Best for Safety of Principal

  • Minimum Investment: $100
  • Stability/Risk Level: High stability / low to moderate risk
  • Liquidity Level: High
  • Transaction Costs: None
  • Where to Invest: Treasury Direct

How to invest. Just as is the case with TIPS, you can invest in US government-backed securities through Treasury Direct. The minimum investment is $100, and you can choose securities ranging from as little as four weeks to as long as 30 years. Many investment brokers also offer U.S. Treasury securities.

Benefits. The principal value of your securities is guaranteed by the US government if held to maturity. The securities also pay higher interest rates than TIPS, though they are not adjusted for inflation. Since the securities are issued by the US government, the interest paid on them is exempt from state income tax.

Drawbacks. Rates paid on US government-backed securities may not be sufficient to account for inflation. Securities with terms greater than 10 years are also subject to fluctuations in market value, based on changes in interest rates. For example, rising rates cause long-term treasuries to decline in value.

4 Best Investments for 6 – 10 years

Traditional IRA: Best for Dedicated Retirement Planning

  • Minimum Investment: Usually none, but some trustees may require $50 or $100 to open
  • Stability/Risk Level: Very low to very high, depending on investment mix
  • Liquidity Level: Limited due to tax consequences
  • Transaction Costs: Generally, no transaction fees on common securities
  • Where to Invest: M1 Finance, Betterment, Zacks Trade, E*TRADE, TD Ameritrade

How to invest. You can open an account, usually online, with banks, investment brokers, and robo-advisors. Typically, you can open an account with no money at all, but you will be required to deposit funds to begin investing.

Benefits. Not only are contributions to a traditional IRA usually tax-deductible when made, but the investment earnings in the account accumulate on a tax-deferred basis. That will give you the benefit of full compounding of investment returns. Withdrawals can be taken beginning at age 59 ½, presumably at a time when you are in a lower tax bracket.

Drawbacks. Early withdrawals, taken prior to reaching age 59 ½, are subject to ordinary income tax, plus a 10% early withdrawal penalty (although there are certain exceptions). IRA plans are subject to Required Minimum Distributions (RMDs) beginning at age 72.

Roth IRA: Best for Retirement Planning + Immediate Funds Access

  • Minimum Investment: Usually none, but some trustees may require $50 or $100 to open
  • Stability/Risk Level: Very low to very high, depending on investment mix
  • Liquidity Level: High for contribution amounts; limited for investment earnings portion
  • Transaction Costs: Generally, no transaction fees on common securities
  • Where to Invest: M1 Finance, Betterment, Zacks Trade, E*TRADE, TD Ameritrade

How to invest. Same procedure as with traditional IRAs, except you must specify the plan will be a Roth. The same trustees that offer traditional IRAs usually offer Roth IRAs as well. See our post, Best Places to Open a Roth IRA 2022.

Benefits. Investment earnings accumulate tax-deferred basis, until you reach age 59 ½, at which time they can be withdrawn completely tax-free (you must also have been participating in a Roth IRA for at least five years for tax-free withdrawal status). Since contributions are not tax-deductible, they can be withdrawn at any time, without ordinary income tax or the 10% early withdrawal penalty. In addition, Roth IRAs are the only retirement plan that’s not subject to RMDs. That means you can keep the plan and let it continue to grow for literally the rest of your life.

Drawbacks. Contributions to a Roth IRA are not tax-deductible. Also, the ability to withdraw your contributions early may prevent you from building up a large plan balance.

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High-Yield Savings: Best for Liquidity with Interest Income

How to invest. The best place to invest is with online banks, like those listed above. They pay much higher interest rates than traditional brick-and-mortar banks. (Betterment offers both automated investing, as well as high-yield savings).

Benefits. High-yield savings accounts are one of the best low-risk investments, as well as one of the best short-term investments. The accounts are completely liquid, so you can access the funds at any time. The account will provide complete safety of principal, along with interest income.

Drawbacks. High-yield savings accounts are primarily for safety of principal and liquidity. They offer no growth potential since the interest rates they pay are generally well below the rate of inflation. In addition, interest rates fluctuate, and can go lower, as well as higher. Most traditional brick-and-mortar banks pay interest rates well below 1% per year, which is why we recommend online banks instead.

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Long-term CDs: Best for Locking-in Interest Rates

  • Minimum Investment: $100 to $1,000 and up
  • Stability/Risk Level: Very stable / very low risk
  • Liquidity Level: Moderate, based on term of CD
  • Transaction Costs: None, but early withdrawal penalty equal to most interest paid
  • Where to Invest: PenFed, Ally Bank, Discover Bank, Capital One 360, CIT Bank

How to invest. You can open CDs at just about any bank or credit union in the country. Some will require you to purchase them at a branch, but many will allow you to buy them online. They can range with terms between 30 days, and 10 years, but most banks don’t exceed five years. Minimum investments are usually $100 but can be much higher.

Benefits. CDs give you an opportunity to lock in current interest rates. This is a particularly valuable strategy if you believe rates will be declining soon. And because the certificates have a certain term, it’s a perfect way to allocate funds for a specific future purpose.

Drawbacks. Rates on CDs are below the rate of inflation. If you withdraw funds from a CD before the stated term, there will be an early withdrawal penalty. It’s usually equal to a certain percentage of the interest paid on the certificate.

What to Look for in a Long-Term Investment

Once again, as a long-term investor, you should be looking for the best mix of liquidity, safety, income, and long-term growth. But to do that, you’ll need to understand exactly how much risk you’re comfortable taking on with your money.

Consider the following factors before implementing any investment strategy:

Your Own Risk Tolerance Level

No matter how brilliant an investment strategy seems to be, investing involves risk. That is, primarily, the risk of losing money on any given asset in your portfolio, or even on the entire portfolio overall. Your ability to live with that risk level will have a material impact on the investments you make.

If you’re not sure what your risk tolerance is, invest a little bit of time completing the free Vanguard Investor Questionnaire. Based on the answers you provide, your risk tolerance level will be provided. That will typically be conservative, moderately conservative, moderate, aggressive, or very aggressive.

Your Investment Time Horizon

Next, consider your investment time horizon. If you’re in your 20s, and retirement is decades away, you can afford to be more aggressive with your investments. That’s because you’ll have time to make up for any short-term losses.

But if you’re just a few years away from retirement, or if you need the money you’re investing for a more immediate need (like a down payment on a house), you’ll want to be more conservative in your investment choices.

Specific Investments You Plan to Make

Finally, consider the individual investment choices you’re making. If you’re investing in a fund, be sure the fund is consistent with your overall investment objectives. If you’re investing in individual companies, you’ll need to do a deep analysis of each company. That will include analyzing its financial position, product lines, current and future growth potential, credit rating, and market position.

Additional Resources for New and Small Investors

If you’re new or intermediate investor, please take advantage of the following articles on this website. The first will show you how to begin investing as a newbie, while the others will provide you with insight on specific investment strategies at various portfolio levels.

Once you understand your own risk tolerance, you’ll better be able to implement the investment strategies recommended in these articles, and by the many other financial articles on the web.

Long-Term Investments FAQs

What are long-term investments?

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Generally speaking, long-term investments are any investment vehicle or strategy designed to provide income, safety, or long-term growth for more than one year.
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Some investments are more long-term than others. For example, stocks and stock funds are generally expected to provide income and growth for several years, but they can also do so for a lifetime. Real estate, on the other hand, is a very long-term investment. It may take decades to produce the desired results.

Is now a good time to invest for the long term?

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Many investors would like nothing better than to be able to time the market. That would involve getting in at just the right time – like after a stock market crash – and getting out when the market peaks. The problem is, there’s no way to know when the market is at bottom, or when it’s reached the top.

As a long-term investor, there is no best time to begin investing. Rather, any time is a good time to begin. That’s because the long-term investor plans to remain invested for years. Short-term declines don’t matter as much, even if they happen shortly after you begin investing. The main objective is to be in the market for the long haul, where the biggest and best returns are.

Summary of the 10 Best Long-Term Investment Strategies for 2022

Once again, below is our complete list of the 10 best long-term investment strategies for 2022:

  • Real Estate: Best for Predictable Gains + Tax Benefits
  • Real Estate Investment Trusts (REITs): Best for Diversifying into Commercial Real Estate Investing
  • Stock Funds: Best for Long-term Growth
  • Cryptocurrencies: Best for Speculation
  • Treasury Inflation-Protected Securities (TIPS): Best for Secure Inflation Protection
  • Government Backed Securities: Best for Safety of Principal
  • Traditional IRAs: Best for Dedicated Retirement Planning
  • Roth IRAs: Best for Retirement Planning + Immediate Funds Access
  • High-Yield Savings: Best for Liquidity with Interest Income
  • Long-Term CDs: Best for Locking-in Interest Rates

As a serious long-term investor, you’ll want to employ several strategies to meet your investment goals. It’s a delicate balance, but your portfolio will need to provide measures of liquidity, safety, income, and long-term growth.

For example, you may want to use high-yield savings for liquidity, long-term CDs and government-backed securities for income and safety, and real estate and stock funds for long-term growth.

With the widespread availability of investment vehicles, particularly ETFs provided by online investment brokers, building such a portfolio should be relatively easy. Just be sure to do additional research on any investment you plan to make.

The post 10 Best Long-Term Investment Strategies for 2022 appeared first on Good Financial Cents®.

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