When building wealth, adopting a long-term perspective is key. While day trading and short-term plays may pay off for some, most investors benefit more from consistent, buy-and-hold strategies.
The right mix of long-term investments aligned with your risk appetite and goals can steadily build your net worth over decades. Here are 7 asset classes to consider for long-horizon investing in 2023.
Best Long-Term Investments for Your Portfolio
- Index funds
Index funds provide instant diversification by passively tracking market indexes like the S&P 500 or FTSE 100. They offer broad exposure to equities for modest fees without requiring stock-picking expertise.
Historically, indexes trend upwards over 10+ year periods despite short-term volatility. Regularly investing even small amounts into index funds allows compounding to work its magic. They will provide stable returns in the long run.
- Investment property
Savvy real estate investing can generate ongoing passive revenue along with long-term equity growth in the value of the property itself.
Since the property market in the UK is currently in freefall, it is important to be careful. Options like investing in rental units or REITs allow exposure to real estate without hands-on landlord duties.
As it is with any other investments, diversification across property types and geographic locations reduces risk. Real estate also acts as a long-term investment portfolio diversifier that zigzags independently from stocks and bonds.
- Dividend stocks
Some stocks provide regular dividend payments on top of potential share price appreciation.
Companies with long histories of dividend growth, such as Johnson & Johnson or Royal Dutch Shell, can provide persistent income and hedge volatility. Reinvesting dividends supercharges compound returns.
If you want long-term investments in dividend stocks, seek companies with a strong cash flow, histories of dividend increases, and stocks trading at reasonable valuations.
The compound growth turns small stakes into substantial future income streams.
- Gold or silver bars
Physical precious metals make a smart play for long-term, buy-and-hold investing thanks to limited supply and perpetual demand.
Over time, gold and silver usually appreciate steadily, hedging inflation and providing stability amidst market turmoil. Bars allow investing in the metals themselves without collector premiums attached to coins.
For investing purposes, lower premium bullion offers the most ounces for your pound.
Metals can be stored securely with reputable dealers. You can buy silver bars to be stored in a secure vault if you are worried about security. Visit Physical Gold to browse their silver bars selection and find out more.
- Corporate bonds
High-quality corporate bonds act somewhat like fixed-income investments, providing steady interest payments along with a return of principal down the road.
Choose established companies with top credit ratings and long track records. Favour shorter durations under 10 years to avoid interest rate fluctuations.
Laddering bonds with staggered maturities helps to ensure access to your capital each year.
You can use corporate bonds to offset more volatile equities in the other long-term investments in your portfolio.
These insurance contracts are designed to provide guaranteed income during retirement years.
Lifetime annuity payments can hedge longevity risk by ensuring you don’t outlive your money. The returns on investment depend on the duration and pay-out terms selected.
Since accessing funds early usually comes with penalties, annuities are meant for retirees seeking income, not younger investors needing liquidity.
Annuities reduce risk later in life; thus, they are some of the best long-term investments for your portfolio.
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- Broad market ETFs
For hands-off diversification in a single ticker, broad market ETFs like VTI or VOO track entire stock indexes encompassing hundreds or thousands of companies. These exchange-traded funds contain a wide swath of industries and market caps for built-in stability.
Low expense ratios keep costs down.
Set it and forget it index ETFs are an easy route to steady, long-haul returns from the overall stock market’s upward trajectory.
- High-yield savings accounts
For a low-risk way to earn modest returns on excess cash, high-yield savings accounts offer up to 2% interest these days. Compared to standard accounts earning 0.5% or less, high-yield options provide substantially more income.
Make it easy by setting up direct deposit so excess cash flows right into the account monthly. Interest compounds are tax-free.
It may not be a huge return, but every bit of yield counts over the decades.
- Municipal bonds
Also called munis, municipal bonds are debt securities issued by local governments to fund public projects. Interest is exempt from federal taxes and sometimes state/local taxes too. That tax perk boosts returns.
For this long-term investment, stick to strong issuers with top credit ratings for safety. Interest rates on munis tend to follow Treasury yields, providing stability.
Holding bonds to maturity provides reliable income until the principal is returned. Remember to ladder maturities to manage cash flow.
- Target-date funds
Target-date funds are other must-have long-term investments for your portfolio. They provide automatic diversified investing in a single ticker by holding a broad mix of assets that shifts over time toward more conservative allocations as the target year approaches. This set-it-and-forget-it option rolls with an investor’s time horizon.
With target-date funds, expense ratios are higher than buying funds à la carte, but they provide simplicity. Accumulate shares consistently over time, and the fund adjusts investments over the decades.
Thinking long-term opens up smart investments suited for growing enduring wealth over time. When deciding on which are the best long-term investments for your portfolio in 2023, pick assets that align with your strategy, risk appetite, and timeline to make your money work hard for your future.
This is a contributed post.
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