There are many ways to make money, and fewer ways to grow wealth. Over centuries, one way has consistently stood out as the greatest means for growing wealth and that way is by INVESTING.
And when it comes to investing, people have varying philosophies, each requiring a varying degree of know-how, tenacity, and risk tolerance. Over centuries, one investing philosophy/strategy has consistently stood out as the safest, simplest, and most-rewarding over a long period of time and that strategy is LONG-TERM INVESTING.
So what is long-term investing or what are long-term investments?
Long-term investing is an investing strategy where an investor is willing to hold on to an asset (or assets) for longer than two years with the hope of making promising returns over the long run.
Long-term investors are generally willing to tie up capital for a long period of time with the promise of higher returns on their investment. Examples of long-term investment include investment in real estate, dividend stocks, and bonds.
Checkout: 10 Long-term Investing Strategies that Work (usnews.com)
There are many reasons why people opt for a long-term investing strategy, some of which include: less risk, its simplicity, compound interest, fewer tax bills on returns, and the simple fact that historic data shows that long-term investors almost always come out on top.
Also Checkout: 8 Things to Consider before you Start Investing
As you consider building a long-term investment portfolio, I like you to have the words of Benjamin Graham (one of the greatest investors of all time) in mind:
“The best way to measure your investing success is not by whether you are beating the market but by whether you have put in place a financial plan and a behavioral discipline that are likely to get you where you want to go” Benjamin Graham
Checkout: How to Make a Personal Investment Plan for Long-term Investing Success.
Here are the 4 Best Long-term Investments that delivers promising safe returns:
1. Growth Stocks
Investing in Growth Stocks is one of my preferred long-term investments, this is because of their high rewards potential.
A growth stock is a share in a company that is expected to grow at a rate that is significantly higher than the average expected growth for the market. They are characterized by a relatively high P/E ratio and fast-growing sales and earnings.
If you are interested in building a long-term growth stocks position, START with INDUSTRIES and not COMPANIES. What I mean is, instead of jumping to pick individual “growth stocks”, start by first identifying industries that are expected to grow at a significant rate over the next couple of years.
For instance, in the mid-1990s, it was expected and clear that over time eCommerce as an industry/market was going to blow up in market size, and companies like eBay and Amazon that lead that market went on to deliver impressive returns for her investors since they went public.
eBay went public in 1998 and Amazon became a public company in 1997, and they’ve returned 8,341% and 190,000% respectively.
Amazon’s return is life-changing, a humble $1,000 investment in its IPO day would easily make one a multi-millionaire today. But it wouldn’t have happened overnight, it would take two decades of holding on through the ups and downs (the dot-com bubble and the 2008 financial crisis).
Today, there are many industries like eCommerce was in the mid-1990s and even in the early 2000s and you could create a long-term position in the leading companies in these industries.
Some of these growth industries/markets include the Electric Vehicle, Autonomous Vehicle, 5G, Solid-state Batteries, Renewable Energy, and Artificial Intelligence markets to mention but a few.
Here are some growth stocks picks that may interest you:
- Best Artificial Intelligence Stocks to buy and hold for the Long-term
- Best Self-driving Vehicle Stocks to buy and hold for the long-term
- Best 5G Stocks for 2022 and Beyond
- 3 Hot Solid-state Battery Stocks
It is important to note that not all eCommerce stocks of the 1990s delivered returns but the ones that did more than make up for them. Hence, investing in growth stocks as rewarding as they may be can be risky investments.
2. Real Estate
It is thrilling to see the returns of growth stocks like Amazon, however, it is a completely different thrill to own a piece of cash-yielding real estate.
I love to say that as an investor, nothing beats the feeling of owning a real estate property (or properties), so I will say it: NOTHING BEATS THE FEELING OF OWNING A REAL ESTATE PROPERTY.
U.S. President Franklin D. Roosevelt once said that “real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world”.
There are 2,755 billionaires in the world according to Forbes’ 2021 World’s Billionaires list and 8% of them made their billions through real estate.
Arguably, real estate builds wealth more consistently than any other asset class, it has proved time and time again to be a more reliably wealth-building asset throughout recorded history.
If you’re interested in real estate investing, check out this article on millionacres.com: How to Invest in Real Estate: 10 Ways to Build Wealth
“90% of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate” Industrial Billionaire Andrew Carnegie.
3. Dividend Stocks
Since the 1600s, starting with the Dutch East India Company, publicly traded companies have been issuing regular dividends to their shareholders.
Dividend stocks are stocks of public companies that distribute a portion of their earnings to their shareholders. Dividend investors benefit from predictable dividend payouts along with the typical capital appreciation from stock growth.
Dividend stock investing is ideal for investors who want to lower their risks, gain passive income from their investments and receive tax benefits on qualified dividends. It is like investing in real estate, your property goes up in value over time and you get valuable cash flow from rent collection.
“If you don’t find a way to make money while you sleep, you will work until you die” Warren Buffett.
There is a great movement around earning passive income and varying strategies around dividend investing. A lot of these strategies revolve around what you do with the dividends or the kind of dividend stocks you choose to invest in.
As a long-term growth stock investor, if I’m going to invest in dividend-paying stocks, I prefer dividend growth stocks. Nonetheless, there are many roads that lead to Jerusalem.
Checkout: How to Invest in Dividend Stocks: A Guide to Dividend Investing
4. Index Funds (Mutual Funds/ETFs)
One cannot create a list like this and not include index funds.
If you desire sustainable growth, have no time for stock picking hassle or time-consuming portfolio management, and simply prefer to follow a long-term passive investment strategy then INDEX FUNDS should be on the top of your list.
An index fund tracks the performance of a specific market index or the entire market, like the Vanguard S&P 500 ETF which tracks the S&P 500 Index. They come in two boxes; mutual funds (usually actively managed funds) and ETFs (typically passively managed funds).
Checkout: Introduction to Index Funds by U.S. SEC (investor.gov)
There are index funds for all major market segments, therefore, if you come to an informed position that a particular market segment is bound to deliver long-term growth and don’t want the risk associated with picking individual stocks in the segment, all you need do is invest in an index fund that tracks that market segment.
Most prominent index funds today have been around for years, hence, you’ve historic data to guide you in picking the index funds that suit you and your investment goals.
Index funds provide a great long-term investment vehicle for investors who want to go about building a consistent wealth PASSIVELY.
Checkout: 9 Best Index Funds for Long-term Investors (fool.com)
I’m a Technology Stock Analyst, with focus on companies developing cutting-edge techs. Keeping track of cutting-edge techs, companies and stocks is what I do almost everyday. And I love it. Whether it’s artificial intelligence, 5g, or autonomous vehicles; I’m all in.