5 Investments To Make In 2024 To Build Wealth

It’s one thing to invest. Knowing which investments you should choose to get you closer to your wealth-building goals is another thing entirely. While each investor will have unique targets and risk tolerance levels, building wealth involves a few tradeoffs. You want to balance risks and rewards through a diversified portfolio.

Diversification means not sticking to one type of investment, such as bonds or CDs. It also means considering alternatives to conventional choices like stocks. Although there’s nothing wrong with choosing traditional financial assets, you may want to broaden your horizons. Here are five investments to make in 2024 to build wealth.

1. Real Estate

Real estate can represent a wide array of investment choices. You’ve got single-family homes, apartment buildings, commercial plots, and real estate investment trusts. You might even consider mobile home parks and undeveloped land. Real estate may not consistently outperform the stock market – but it comes with different advantages.

From 1968 to 2009, the average appreciation rate for homes was 5.4% each year. This rate might be less than the performance of the S&P 500. However, you don’t always have to pay the total price of investing in real estate at once. You don’t even have to use all of your own money. Syndication deals and crowdfunding sites let you front the funds you’re comfortable with.

You’ll also get the tax benefits from owning real estate, such as deductions for maintenance expenses. While you might think real estate will come with property management headaches, it doesn’t have to. Lifestyle Investing expert Justin Donald says property ownership can be “through a real estate investment trust. In the long run, real estate can be a good investment because it appreciates in value.”

Real estate is a solid choice if you’re looking for a long-term investment with less volatility than the stock market. Your return will, of course, depend on factors related to location. And with the rise in crowdfunding platforms, you can start small with a completely hands-off approach. You’ll pool your funds with other investors while letting the platform take care of the rest.

2. Savings Accounts With High Yields

No, a savings account with a four or five-percent interest rate won’t make you rich overnight. But it will help you add more to your emergency fund. And why shouldn’t you yield more on the money you have sitting around, just in case?

Say you have $50,000 in a savings account with a 1% interest rate. Your $50,000 will earn approximately $500 in interest in a year. If you park the same $50,000 in a high-yield savings account with a 4% interest rate, you’ll earn $2,000 instead. Over time, this difference and the magic of compound interest add up.

You’ll be able to build your savings faster, hands down. The additional interest might pay for a vacation or a home improvement project. In addition, savings accounts are protected by FDIC insurance up to $250,000 with the same bank. This $250,000 limit includes all your deposit accounts with the same bank, such as checking, savings, and CDs. If you think the value of all your accounts will exceed the FDIC threshold, spread them out between banks.

3. Collectibles

Antiques, vintage cars, and fine wine collections may not seem like obvious investments. But they can be alternatives to building wealth through conventional means. Undoubtedly, collectibles appeal to smaller population segments. Not everyone has the space to store a growing art collection and several vehicles from decades past.

But if you’ve got room for a wine cellar or an array of rare coins, collectibles diversify your portfolio. Like real estate, these alternatives to the stock market require long-range planning. Collectibles aren’t always liquid, meaning you can’t buy them today and reap the rewards by selling them tomorrow. You’ll also need a strong interest in whatever you choose to collect.

Developing a keen eye and knowledge for these rare items will help you know what to add to your budding investment. In addition, you have to be willing to put the time into maintaining or restoring some of these items. There’s also the risk you won’t want to part with portions of your collection. Nonetheless, you may want to pass down the items to an heir who can decide whether to hold or sell.

4. Corporate Bonds

You’ve likely heard of U.S. Treasury bonds. You know they don’t carry a lot of risk. But in exchange for this stability, the returns are lower. Well, corporate bonds can be the sweet spot for more risk-averse investors.

With corporate bonds, you’re lending your money to businesses instead of the government. There’s more risk involved, but the returns can also be higher. While the government is unlikely to fold, companies have a history of going under. You can reduce some of your risk by purchasing bonds from businesses with a longstanding history.

Conventional wisdom says the more financially stable a company is, the less likely it will be gone tomorrow. The tradeoff is a lower return than with a younger firm without a proven track record. You’ll want to weigh your risk tolerance against your desired return. You can also mix it up by purchasing a few high-risk and lower-risk corporate bonds.

5. Index Mutual Funds

Taking a do-it-yourself approach to stock market investments can have less than stellar results. To do it carefully, you must study performance and market trends. Unless you’re a finance whiz, all the data can overwhelm you. Even if you have an MBA in finance, it takes a lot of free time to analyze your way to fruitful decisions.

Index funds are a way around this. These funds invest in stocks sold on a specific exchange, such as the S&P 500. The goal is to achieve a return equal to the overall index’s performance. Say the average one-year return for the S&P 500 is 4%. An SP&P 500 index fund with adequate performance would produce nearly identical returns for the year.

Some annuities may also be considered index funds. Typically, index funds are long-term investments. Shorter-range returns may not be as high as long-range yields. In addition, there is usually more short-term volatility with index funds since these investments are groups of stocks. However, you don’t have to put as much thought into what stocks to buy, hold, and sell.

Building Wealth Through Investments

It would be nice if wealth came instantly. Short of winning the lottery or receiving a windfall inheritance, most individuals invest to achieve their financial goals. When building wealth is your aim, you want to find the right balance between risk and reward.

Diversification at the micro level is one way to accomplish your goals – but you can also diversify at the macro level. Adding various types of investments, including alternatives to individual stocks, can get you closer to your goals. Keep thinking and strategizing how to make your money work for you, and you’ll be on the path to building wealth.