At this point, Millennials are already climbing up the corporate ladder, taking on more significant roles and contributing more to their respective companies. As their careers grow, so do their salaries.
Adding to your savings is always great, especially when accounting for inflation and preparing for future expenses. However, you should not just keep it in your bank for extended periods.
You may not maximize your money’s worth if you keep it in the bank. Even with the earned interest, it is not enough to grow your money considerably.
In that case, making the proper investments as early as now is vital. While you are still working, taking as many opportunities as possible is essential to growing your hard-earned money effectively. Doing so can help keep you financially secure.
Here are five financial investments Millennials should make to grow their money.
The Most Popular Financial Investments Millennials Should Make
1. High-yield savings account
This savings account pays you interest on your cash balance. Similar to a regular savings account, its high-yield counterpart can make your money accessible.
This way, you can withdraw your money if you need it while you earn higher interest. They also benefit investors who do not want risks that can cause them not to get their money back.
Banks that offer these accounts are FDIC-insured, which means your deposits are kept secure. High-yield savings accounts are generally safe investments to make.
However, there is also a possibility of eventually losing purchasing power should inflation occur along with low rates.
On the other hand, you can earn much higher interest rates with online banks, as long as the overhead costs are few.
2. Short-term government bond funds
Short-term government bonds—or exchange-traded funds (ETFs)—are mutual funds for investing in debt securities. Usually, the government is the one that issues these funds. Like certificates of deposits (CDs), short-term government bonds shield you from significant risks when interest rates climb.
Generally, these funds are ideal for low-risk investors, but beginners can also invest in them. Moreover, you won’t have to worry about fluctuating rates, unlike long-term bond funds. This bond is more prone to fluctuations than short-term ones because of changes in interest rates.
If interest rates go up, the prices of existing bonds decrease. Conversely, interest rates can also go down if the bond prices increase.
However, long-term bonds bear greater risks due to their volatility or sensitivity to price changes from interest rates. They take longer to mature, unlike short-term bonds with shorter durations which are less volatile.
Government bonds can also help you by funding payouts per month. Due to interest rates hiking in 2022, you can expect these funds to pay more than before.
Real estate investment trusts, or REITs, are companies that function as trusts, managing a wide portfolio of real estate investments.
Compared to other alternatives, many consider REITs as passive investments. Rather than owning assets, you can invest in a REIT and acquire income via the properties the business manages.
REITs also invest in commercial properties, including hospitals, offices, and malls. A REIT is a good option for investing in commercial real estate if your funds are insufficient.
The Advantages of REITs Investments
There are multiple advantages of REIT investments that you can benefit from. And here are some of them.
Supplementing your income
Investing in REITs allows you to support your primary income without owning, viewing, or maintaining a property. You can avail of this benefit as REITs take away the heavy work of active real estate investments.
Extra income on the side
REIT investments also provide regular payouts, even if small. However, the amount may still depend on your preferred REIT investment.
Diversifying your portfolio
Technically, several REITs are stocks. In other words, they can aid you in diversifying your portfolio and even mitigate your investment risks.
The Disadvantages of REITs Investments
Though REITs are beneficial in multiple ways; you should consider weighing the following disadvantages before investing.
No immediate payments
If you expect to receive money immediately, it may not happen. That is because REITs are long-term investments that generate increasing income over time.
Imposed heavy taxes
REITs are unlike eligible distributions. The government imposes heavy taxes on REIT investments.
Since you do not manage or own the properties or loans, your influence over your REIT assets is limited.
4. Flipping and micro-flipping
Flipping a property is one of the active investments you may want to consider. When you flip a house, you purchase a fixer-upper that requires a lot of work. However, you can turn it into an ideal home and sell it.
This investment is an excellent way to earn extra income. But flipping a house is also risky.
You may run into multiple issues as you will shell out a hefty amount to cover the expenses. Doing so may cause you to lose money or encounter cash flow problems. If you are lucky and things go according to plan, you can profit greatly from flipping the property.
The Advantages of Flipping a Property
If you’re having difficulty deciding, here are some advantages of flipping properties to help with your decision.
Options for crowdfunding
If you are the one fixing the house, you can ask for help from others in terms of finances. This way, you won’t have to shoulder all of the expenses. It’s also a great strategy that will let you diversify your investment portfolio without agreeing to a significant initial commitment.
Flipping properties grant investors unique opportunities they may not get from other investment types. These open doors are thanks to the support that other investors give.
Minimal work required
Some types of real estate investment may require extra processing work related to owning land or a home on top of several fees. However, flipping a property can eliminate this extra work. In fact, you can complete the entire process online.
The Disadvantages of Flipping a Property
Flipping a property may be simpler than starting from scratch, where you start by owning land before putting up a house. But some disadvantages also come with it. Here are some drawbacks you may want to consider if you’re looking to flip properties.
Imposed tax dividends
Perhaps you decide to opt for crowdfunding to finance your property-flipping endeavor. If that’s the case, you and the other crowdfunding investors may receive taxed dividends.
In other words, crowdfunding investors—including you—will have to settle ordinary income taxes according to the payouts.
Minimum income requirement
Some investment platforms require you to meet a minimum income amount. This drawback is something investors find odd, especially if they have opted to invest through crowdfunding due to the low financial requirements.
More often than not, crowdfunding sites charge service fees to their users before they can access them.
5. Raw land
This property is one of the most common investments. Typically, investors purchase raw land for residential development or commercial properties. The purchasing process is not simple, as an extensive market is necessary before acquiring land, especially if you plan to develop the property yourself.
As such, being familiar with real estate terms can guide you in making the right purchase. Raw land is highly fitting for those with significant money to invest.
It may also be attractive to those with a deep understanding of real estate matters such as zoning restrictions and construction laws. It also pays to know about the commercial, rental, and local residential markets.
The Advantages of Raw Land Investments
There may be a lot of work involved in purchasing raw land, but it offers several advantages. Here are some pros of raw land investments.
Unlike other assets, raw land is surprisingly easy to acquire. Additionally, it is way less expensive compared to developed acreage, residential, and business properties.
You may think that maintaining raw land is costly. However, it’s the opposite. In fact, maintenance costs are not too expensive.
The frequency of repairs or changes is much less with raw land versus maintaining a building and other similar properties. In that case, you won’t have to pay a hefty amount on repair costs.
Multiple options and uses
The beauty of raw land is that it offers a wide range of options and uses. You won’t just have the liberty to purchase and own it. Depending on your preference, you can lease or even construct anything on it.
The Disadvantages of Raw Land Investments
Like any other property type, some disadvantages come with raw land that you may want to look at before making a purchase. Here are some of its drawbacks.
Minimal tax advantages
You may be unable to maximize the benefits of owning vacant land because it only comes with a few tax advantages.
Takes time to earn money
Most likely, you may not make money immediately after purchasing raw land. It is best to wait for the land to appreciate while renting it out for various functions.
Has zoning difficulties
Whether cleared and classified for commercial or residential use, getting clearance for any development plans can be a headache. Zoning matters are a challenging procedure.
The designation of your purchased land can make or break your investment as it may limit what you—or your clients—can construct on it.
Choosing the Right Investment Opportunities to Further Your Money’s Growth
There are several investment options to choose from. However, it’s best to pick suitable choices that help you stay out of debt while supporting your financials.
At the end of the day, what matters most is how these options can further grow your money for a secure future.