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The Best Investments for 2018

Despite what you may think, investing is for everyone.

When it comes to investing, the best thing you can do is start.

I’ve been emphasizing this for years with clients and friends who ask how, when or where they should invest. As I’ve told them, the sooner you start the faster you can put your money to work for you.

The worst thing you can do is become overwhelmed, freeze, and end up doing nothing.   

Though getting started can be a struggle, following through on the ideas below will help you make good investments this year.


Stock market

While it is common advice, the stock market can offer excellent investment return opportunities for you. 

After all, most millionaires earned their wealth through building and owning a business. For most of us, the next best thing is owning stocks which represent an ownership stake in a public company.

Even though stocks are at all-time highs you will benefit from putting your money to work in the market rather than sitting on the sidelines waiting for the right opportunity. Ultimately, the market can continue to go higher for far longer than anyone can accurately predict.

Accordingly, you can benefit from using dollar cost averaging. That is, instead of putting all your money into the market at once, start by investing 10-20% before adding more. For example, if you have $1,000 or more saved start investing $100-$200 in the market on the first of every month.  As a result, you will gradually increase your investment. Over time the cost of your investment will be calculated as a dollar-cost average each month throughout the investment period, hence the name.

There are two reliable options for where you can open your investment account. You could open a self-directed online brokerage account with a company like TD Ameritrade or ETrade where you will be able to choose how your money is invested. Another option would be for you to open an account with a robo-adviser like Acorns or Betterment that will create a portfolio for you based on your risk tolerance and goals for your money.

No matter if you choose to use an online broker or a robo-adviser, you should invest this money into an Exchange Traded Fund (ETF) that tracks a major market index. For example, the ETF with a ticker of SPY tracks the S&P 500 Index which mimics the performance of the 500 largest publicly-traded US companies. This ETF will allow for you to get market-like returns without costing as much as a mutual fund, which ultimately keeps more money in your account.


Real Estate

At this point in the economic cycle inflation and general business conditions are beginning to speed up.

Simply put, this means that inflation-sensitive investments that benefit from a strengthening economy, like real estate, should prosper.

If you want to invest in real estate there are several options.

First, you could opt for the traditional route of buying. You can either buy at the market price or find a house at a wholesale price. After purchasing a home you could either use it as your primary residence or turn it into a rental property. The path you choose will depend on your personal needs.

Second, for those of you more interested in real estate investing for potential short-term price appreciation then fixing and flipping properties could be an option. But just as with any other investment, be sure to study the craft, learn the market trends, and begin to test your ideas before committing money to a project.

Of course, one drawback to traditional real estate investing is that it takes a considerable amount of capital to cover a down payment and costs involved at various stages. However, there are a few options for smaller investments in real estate.

First, you could invest in ETF’s specializing in real estate. These ETF’s function just like a stock market ETF, except they track an index of real estate investments instead of an index of stocks.

Second, some individuals invest in Private Real Estate Notes. As in investor in a Private Real Estate Note you are the recipient of a portion of the monthly interest payments. This can be an attractive option instead of keeping money in traditional cash investments with lower interest rates. 

Similarly, the third option would be to invest in private real estate deals through a platform like FundRise. In essence, FundRise democratizes the private ownership of commercial properties which have long been a source of wealth creation for big institutions and high-net-worth individuals.

Throughout my work in the investment field private real estate investments were exclusively available to investors with a household net worth over $1 million. As a result, most people have been excluded from consideration for this investment option. Consequently, their portfolios have been limited to a mix of stocks and bonds traditionally. However, research has shown that a better portfolio allocation can be built to minimize risk and increase return by including private real estate.


An Investment in Yourself

As Ben Franklin said, “An investment in knowledge pays the best interest.”

While it’s nice to see investments in the stock market and real estate grow your account balances, if you do not invest in yourself you will not have anything to offer.

Without continuing your education through reading books, listening to podcasts, attending seminars your skills from high school, college and your work will quickly become obsolete.

To emphasize how important it is to read consider that the average CEO reads 60 books a year while the average employee reads only one. Accordingly, C-Suite executives are financially rewarded for acquiring additional skill by earning an average of 300 times more than the average employee. 


Summary

As you can see finding a way to invest isn’t as difficult as it may have seemed.

Sometimes the hardest part is getting started.

But be creative, do your research, and take action with investing.

Hopefully these three investment ideas will help you get moving toward investing and having a better chance of realizing your goals in 2018.


As always, feel free to contact me with any questions or comments. Thanks for reading!


John

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