Investing in a variety of assets allows you to grow your money, build wealth, and achieve your financial goals. While 2024 may be a difficult market environment, investors can still find opportunities for long-term growth. Putting your money into various assets can help reduce the overall risk, potentially provide returns higher than the inflation rate, and help spread out your risk to achieve stable returns over the long term.
Investing in cryptocurrencies can help you diversify your investment portfolio and potentially hedge against inflation. Cryptocurrencies like Bitcoin have a limited supply and are designed to be scarce, which makes them potentially attractive as an inflation hedge. Viraj from 99 Bitcoins explains that investing in a new cryptocurrency with a low valuation can offer significant growth potential. For example, Binance Coin (BNB) when it launched in 2017 had a much lower valuation of $0.10 compared to its current price. In 2021 BNB reached an all-time high price and has since expanded with the growth of the Binance Smart Chain. Investing in cryptocurrencies does carry risks, but can be added as part of a balanced investment strategy.
If you have a lower risk tolerance, high-yield savings accounts may be a safer option. This is a savings account offered by traditional banks as well as credit unions that typically earns a higher annual percentage yield (APY) compared to a traditional savings account. With a high-yield savings account, you have easy access to your money, allowing you to withdraw funds as needed without penalties and fees. These accounts provide a high degree of liquidity, which means you can quickly convert your savings into cash without incurring losses. This type of investment is best suited for short-term savings goals or emergency funds.
For investors who have a specific savings goal and can commit to a fixed period, Certificates of Deposits (CDs) are suitable. These are time deposit accounts that offer a set interest rate for a designated period of time. The fixed interest rate for the duration of the fixed term provides a more predictable return on your investment. CDs can provide higher interest rates for long-term deposits which are around 4.50% for a one-year term. While CDs are low-risk investments, you must keep your money deposited for the full term to avoid early withdrawal penalties. Another drawback is if interest rates rise during your term, you could potentially miss out on the opportunity to earn higher returns.
Depending on your risk tolerance, stocks can be a good investment and provide higher returns compared to other asset classes like cash or bonds. However, stocks do come with higher risk and volatility. This asset class is generally liquid investments, which means you can buy and sell them pretty easily. This can be advantageous if you need access to your money quickly or simply are in a position to withdraw some funds and want to use it to purchase items, travel, wager online, or buy a new vehicle. Investing in stocks can help protect your purchasing power from inflation, however, stock prices can fluctuate significantly in the short term. Historically, stocks have provided higher returns compared to other asset classes over time, but they also provide no assurance if the stock will appreciate in value or provide a positive return on investment.
