Bring up the topic of investing, and most people immediately think of things like stocks, bonds, and precious metals. For some reason, most other effective ways of socking money away until retirement or a rainy day get left out in the cold. The good news is that there are many ways to invest, and most of them are as safe or safer than the stock or precious metals markets. People who are familiar with a wide array of investment vehicles tend to make more profitable choices simply because they know what’s available. If you could choose from 100 cars on a lot, as opposed to just choosing from among two cars, you would automatically have an advantage. Investing is like that too.
For most, it makes a difference whether an investment is tax-deferred or not. Options like IRAs and life insurance policies let you build up your financial returns over time without worrying about paying tax on the money each year. Instead, you pay Uncle Sam when you take withdrawals, typically at an advanced age when your tax bracket is very low. Other investors are simply in search of a way to earn high returns on their investment and expect to pay the full amount of tax annually. Folks who speculate in precious metals, the stock market, and collectible cars are in this group. Even after taxes, they often stand to make attractive returns and, in any case, they enjoy a bit of risk-taking.
There are at least 50 common ways that people invest their money. For 2019, the top nine choices are listed below. Note that some allow tax deferral on the growth and some do not. The items are in no particular order but are among the most popular of all investing methods for the current year.
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Certificates of Deposit
CDs are federally insured, are sold by most banks and come in varying maturity lengths. Of course, the longer the maturity, the higher the interest. However, CDs are not as liquid as many other investment choices, so it takes some planning before you can decide on the maturity length that is right for you.
Individual Retirement Arrangements continue to rank near the top of the investment popularity list for one simple reason: they offer one of the easiest ways to defer paying taxes on both the income you receive from your wages and on the growth of the fund. There are two kinds of IRAs: Roth and traditional. The Roth IRA does not allow for the deferral of tax on the amount invested, only on the growth. That might be the reason that only about one out of five IRA-holders chooses a Roth.
Often considered the safest of all investment types, these instruments help the U.S. government pay for its various projects and pay its many debts. The rates of return on treasuries are quite low compared to other kinds of investments, but they are a top choice for people who like to sleep well at night.
Cash-value Life Insurance
Ty Stewart, owner of Simplelifeinsure.com says “life insurance policies are an effective way to defer taxes on the growth of the investment”. That’s because policy-holders don’t have to pay taxes on investment returns within the policy until they withdraw the money. It’s also possible to help pay for a house or fund a child’s college by borrowing against a policy’s cash value. In fact, such borrowing is tax-free. Closely related to cash value life insurance is the common annuity. Both these instruments are sold by insurance companies, and both offer tax-deferred features.
Right now, the price of real estate is at a low point, as are loan rates for buyers. One key advantage of investing in real estate is the ability to write off losses on income tax returns. It’s even possible for property owners to improve their cash flow on a property that shows a loss for tax purposes. That’s the best of both worlds and is why so many people gravitate to real estate as an investment vehicle.
Companies that offer high growth but don’t pay any dividends are one of the tax-deferred methods of investing. Owners of these shares need not pay taxes on the price appreciation until they sell the shares. If that event takes place after retirement, you stand to pay at a much lower rate.
Some stocks pay regular dividends. That can mean regular returns and possible growth in price over time. Investors who are looking to improve their cash flow and reap the rewards on stock purchases year after year often turn to dividend stocks as a way to achieve that goal.
It’s becoming more popular to invest in gold, silver, platinum and other precious metals. Just a decade ago, fewer than 5 percent of adults considered investing in metals. Now, about one-third of active investors say they own at least a small amount of precious metals. The most common, measured by popularity and the amount owned, is gold. Silver is a very close second while the others, like platinum and palladium, are a distant third and fourth.
Gold has gained traction among ordinary investors over the past decade primarily as a result of stock market volatility. Add to that the fact that most financial advisors now recommend holding a small percentage of a long-term portfolio in gold. The standard advice is to keep between 5 and 10 percent of your savings in gold.
Money Market Accounts
Investors who are able to meet the typically high minimum balances on MM funds view them as a way to earn high yields and enjoy liquidity at the same time. Money market accounts are available at hundreds of financial institutions and have been one of the top places for people to park their “emergency savings” cash for many years. These investments are backed by the FDIC, which means they are among the safest of all options for people who like to avoid financial volatility.