Investing is one of those topics that is often fairly polarizing.
People tend to either feel that they’ve got a solid handle on their investments and the game only gets more and more exciting, or they feel as though they’re way behind and won’t ever be so “fancy” as to be able to talk about their investments.
But investing shouldn’t have to be so hard! It shouldn’t require a finance degree, your own personal broker, or even much thought sometimes if we’re being honest.
That’s why we wanted to put together a resource that will truly give you solid advice about the best ways to invest money. We wanted you to be able to get the most out of your money, whether you’re investing your first dollar or holding mature investments and just want to take your money game to the next level.
We talked to the best personal finance bloggers across the internet, and we narrowed it down to the top 45 or so that gave the biggest bang for your buck with their advice, to help you learn how to invest money wisely.
Read on through this article to get a new look at tips for:
- which investments have the best returns,
- the smartest ways to invest money
- the best investment option for beginners
- how to invest in stocks, and be smart about it
- and much, much more!
45+ Tips On The Best Way To Invest Money
Logan Allec — Owner, Money Done Right
For many people starting out, I wholeheartedly believe that house hacking a small multi-family property is one of the best ways to invest your first few thousand dollars. You can do this by putting as little as 3.5% down with an FHA loan.
I house-hacked a four-unit property in the Los Angeles area in my 20s with only $15,000 down, living in one unit and renting out the other three.
Since then, the property has also cash flowed for me on a monthly basis. It has also appreciated and grown my net worth (at least on paper) by hundreds of thousands of dollars.
And you can do this too! Depending on where you live, you may not need $15,000 to do it. If there are less expensive small multi-unit properties in your area, you may be able to do this with only $4,000 or $6,000.
Just look on popular real estate websites like Zillow and Redfin for multifamily properties for sale in your area (on these websites there is generally a checkbox you can check to show only “multifamily properties” or “income properties”).
This should give you an idea of what 2- to 4-unit properties are going for in your area. Then multiply this price by 3.5% to get an idea of the down payment you’ll need to come up with.
Of course, you’ll also want to budget a few thousand dollars for other costs that may come up — be sure to discuss these with your real estate agent!
Rosemarie Groener — Owner, The Busy Budgeter
People get so overwhelmed about the best way to invest money that they end up not doing anything because they’re not sure how to do it “right.”
If you get in that mind space- just open up a Betterment account and set up an automatic transfer every month directly after payday.
The most important part is that you actually do it- not that you do it perfectly.
Michelle Schroeder-Gardner — Owner, Making Sense of Cents
The best way to save money varies from person to person, so there is no one exact answer that is suitable for everyone. But, for me, I like easy, long-term investing as my favorite.
For me, I like stock market index funds as it is usually less risky than other forms of investing in the stock market. This is because it’s made up of many of the stock market’s biggest companies, instead of just one company. So, you can be better diversified.
Then, my next plan of action is to simply hold on to it for years, and decades into the future!
Alexis Schroeder — Owner, Fitnancials
The best way to invest money is to keep things simple and automated. I took way too long to get started investing because I was making investing complicated and trying to make no wrong decisions, therefore I made no decisions at all. Eventually, I just went all in and started investing.
I invested my first $1,000 into my 401(k) through Vanguard and found that simply getting started was the hardest part. After I invested the first $1,000, I realized investing wasn’t nearly as scary as I was making it seem. Now I’m in my second year of maxing out my 401(k) and IRA.
I keep things simple by investing every payday, even when the market is down or things aren’t looking good. In the long run, investing pays off.
Andy Hill — Founder, Marriage, Kids, & Money
Investing your money is super personal. What works best for one person may not work best for another.
I can only speak from my personal experience in saying that I like to keep things as simple as possible. I do that in the following ways:
– Investing in low cost diversified index funds
– Dollar-cost averaging over the long term
– Avoiding buying and selling shares based on inevitable market swings
– Reducing my tax burden by investing in tax-advantaged vehicles like the 401k, IRA and HSA
– Automating as much of the process as possible
By following this pattern, our family was able to achieve a $1,000,000 net worth in less than 10 years. It may not work for everyone, but it did for us.
It’s important to experiment and learn what kind of investor you are. I gravitate towards simplicity because it helps me rest easier at night.
- Passive income from the monthly rents. I teach all my students how to make a minimum of $250 a month in passive income from each and every property they buy. That is $3,000 a year in passive income. If you had 10 properties making you $250 a month, that is $2,500 a month and $30,000 a year in passive income!
- Equity Capture when we buy the property. Because we are investors, we never pay full price. If a house is worth $150,000, we buy it for $120,000 and make $30,000 in equity because we buy the property right.
- Forced Appreciation when we take ownership of the property. This is where we would spend money to fix up the property to make it worth more money. $5,000 put into a rental property to fix it up could increase the value by $15,000. That is another $15,000 you made in equity.
- Market Appreciation over time. Just like every property, you property is worth more every year as the market goes up over time.
- Tax Benefits every year. There are MANY tax benefits and it is as if the tax code was written just for us investors. Everything from 1031 Exchange to defer your taxes, depreciation where you right off the purchase from your taxes over 27.5 years, to flying to Hawaii to look at properties and have the trip as a business expense.
- Mortgage Paydown over time. Your tenant pays you money in passive income of $250 a month PLUS, pays your mortgage for you. The principle, interest, taxes, expenses, property manager, etc. are all paid for by your tenant!
Rob Stephenson — Founder, Flea Market Flipper
Our investment advice is a little different than you will hear from most people.
We aren’t big stock market peeps, not because it’s a bad place to invest, but because we know we can make so much more with our money.
We like to invest our money in items that we resell. These are items we buy locally (thrift stores, yard sales, selling apps) and bring them to a larger market online (eBay) and resell them.
Our goal is to 10x our investment. Just last week we sold a Stove for $2,800 that we picked for $200 on OfferUp.
There are SO MANY deals out there just waiting to be found and resold!
Greg Johnson — Co-Founder, Club Thrifty
I still subscribe to the idea that investing in yourself is the best thing you can do with your money. Take a class, earn a degree, learn a new skill – use the money you have to improve upon your existing skillset so you can make even more money.
When it comes to investing for retirement or in the markets, first, take advantage of any retirement programs offered by your employer. Invest at least enough to meet any company match. That way, you can take advantage of any free money that your employer is offering you.
Once you’ve done that, the average person should take Warren Buffet’s advice and invest in low-cost index funds – specifically those that track the market.
The fact is, most professional investors can’t beat the entire market on a consistent basis. So, skip the flashy individual stocks and toss your money in a boring old index fund. It won’t seem so dull once those funds start producing some nice returns!
Philip Taylor — Founder, Part-Time Money®
The best way to invest money is to put it as much as you can into diversified index funds the U.S. stock market automatically, and routinely over a long period of time. Put as much as you can afford each month and try to increase it over time.
You won’t miss the money since you’ll be doing it automatically and you’ll build a tremendous amount of wealth in just a few decades.
I did this and I’m a multimillionaire in my early 40s.
Jim Wang — Founder, Wallet Hacks
If you have access to an employer 401(k) account, or something similar, that’s often the best way to get invested in the market because it keeps things simple. Be sure to review your options, account fees, and vesting schedule (if there is a match) to make sure you’re OK with them.
When I started investing, I did so with my employer’s 401(k) because it lets me think about how to save more money and that side of the equation while simplifying the other side – what to invest in. Also, I didn’t have to worry about taxes at all since it’s deferred.
I also contributed to a Roth IRA and that’s where I learned more about all the investment options available to me.
Anna Barker — Founder, LogicalDollar
The best way to invest for the long term, such as when you’re preparing for retirement, is to focus on low-cost options like index funds. In particular, broad market index funds, like those that track the S&P500, offer consistent returns in line with the performance of the market.
In fact, it was found that investing in an index fund like this will beat a managed fund in over 90% of cases, largely due to the fact that you avoid the comparatively high fees charged by fund managers.
While there are a variety of index funds out there, including total market funds that track the performance of the entire US stock market (or of other countries), investing in a fund that tracks the S&P 500 aligns your portfolio with the performance of the 500 largest publicly listed companies in the US.
This gives you both the diversification and strong returns over time that will more than set you up for retirement. After all, there’s a reason this type of index fund is Warren Buffett’s investment of choice.
Roger Friedman — Editor, The Motley Fool
With easy-to-use online brokerages, the availability of fractional shares, and a market largely on fire, more new investors are jumping in than ever before. That’s great – after all, the stock market is the greatest builder of long-term wealth.
But it’s not just plunking down your cash on the “hot ticker” that everyone’s hyping. That often sets people up for unhappy outcomes – a dangerous combination of unrealistic expectations and FOMO investing. We hope to steer you in a more Foolish (ie, long-term, sustainable, sleep-at-night) path with some tips.
- Don’t buy fewer than 10 stocks.
- Don’t aim for short-term gains.
- Don’t invest all your savings in stocks.
- Don’t borrow money to buy stocks.
- Don’t buy stocks because they’re under $5.
- Don’t expect all of your stocks to go up.
- Don’t use options in your first year of investing.
Forrest McCall — Owner, Don’t Work Another Day
When investing your money, you should always consider your strengths and weaknesses. I’ve seen countless times when people choose to make an investment based solely on the information that others provide, not taking into account their own research or strengths.
It’s wise to invest in well-diversified assets like a mutual fund or ETF. There are many different options, but investing in something like an S&P 500 ETF such as VOO would be a great way to mitigate risk while maximizing returns.
If you’re knowledgeable about real estate, I would highly recommend investing in your local real estate market. You can accomplish this through a variety of ways depending on the amount of cash you have. You could opt to purchase a rental property or rent out a portion of your own home. For those with less knowledge in real estate but are looking to diversify their portfolio, you could always purchase a REIT to get started.
My last investment recommendation is investing in yourself or a business you start. While this can be considered riskier, the returns can easily offset this. This should account for a smaller portion of your overall portfolio, but I think is vital if you’re looking to increase your income over time.
Derek Carlson — Owner, The Money Family
We invested money into our primary residence.
Living in an area of rapid growth and knowing we would sell within 4 – 5 years we bought an “in demand” type of home that had been on the market for a while. It had a large lot, 4 bedrooms, an open layout, and custom features but it screamed the 1980s the moment you walked in the door.
Ultimately we put money into new floors, a new kitchen island & nook, and refinishing the cabinets.
Four years later we sold with multiple offers at well over asking and 65% over what we originally paid.
Jon Dulin — Owner, Compounding Pennies
The best way to invest money is through dollar-cost averaging. This simply means you invest money every month.
When the stock market is rising, your money will buy fewer shares. And when the market is down, you will buy more shares.
Over time, your purchases average out, so you don’t have to worry if the market is too high to invest.
And if you can automate the process, even better. Just take 10 minutes to set up a monthly transfer to be invested, sit back, and let the market do its work for you.
The reason why dollar-cost averaging is a great way to invest is that by investing regularly, you make it a habit. Additionally, when you automate it, you never have to remember to invest. It happens, every single month.
In other words, every month you are putting your money to work for you, building wealth. Over time, your regular investments will compound and grow into a larger sum of money.
Whitney Bonds — Founder, Tried and True Mom Jobs
The best way to invest your money is in a home-based business because when you have a home-based business you can take advantage of all the tax write-offs that go along with it, like your cell phone monthly bill, internet, etc.
The IRS also says that you can even hire your kids to work in your home-based business and you can get your money back that you are already spending on them. Not to mention an actual income if your business makes a profit!
Mike Beatty — Owner, Make Time Online
The best way to invest money is to diversify!! And not ONLY with index funds as that’s only one asset class.
The main asset classes to be diversified are:
1. Paper (stocks, shares, index funds)
2. Real estate
3. Commodities (gold, silver, oil, wheat, etc.)
Owning rental real estate and looking into commodities such as gold and silver are crucial ways to not only maintaining your purchasing power but actually growing it over time.
Comparing the value of assets against each other indicates times when things are overvalued or undervalued i.e. how many ounces of gold buys an average house or one share of the Dow Jones Index.
Jeremy Biberdorf – Owner, Modest Money
Jaroslaw Grochal — Owner, Time In The Market
The best way to invest money is automatically via your paycheck.
Most of us have regular 9-5 jobs and some of us are lucky enough to have a 401k or HSA where we can invest money automatically. That’s a great way to do it simply because of that one key word; automatic.
For a lot of us, investing can be a stressful or time-consuming activity but often your employer can make it as simple as selecting a certain % of your paycheck to go into a well-diversified fund and letting that money work for you through the years.
Best of all, those investments are usually pre-tax and in the case of an HSA can also save you on FICA costs.
The money is automatically invested and never hits your bank account so you can act as if it never existed when setting your budget and spending money. That means it can work for you right away and doesn’t depend on you to actually make the active choice to invest money, it’s all done before you even think about it!
Todd Kunsman — Founder, Invested Wallet
The best ways to invest money involves two things: educating yourself and keeping it simple.
For most, investing money seems challenging, confusing, and intimidating.
But between the education system lacking when it comes to finances and the media making it seem difficult, it’s no wonder people feel this way. However, teaching yourself finances and investing is easier than you think.
Dedicate an hour or two each week reading books about investing and understanding the basics. You’ll realize while there is a lot of information, that it’s not complicated to learn in increments.
Your next step is to keep your investments simple.
Too often people want to buy tons of individual stocks, start tinkering with their mutual funds every day, or have a handful of funds in many overlapping sectors. In reality, it’s best to keep your portfolio simple to start, like a three-fund portfolio of index funds.
Another option is low-cost target-date retirement index funds. The simpler you keep your portfolio and the less tinkering, the better your long term results will be.
Keeping your portfolio simple with index funds and investing consistently is one of the best ways to invest money.
Brandon Renfro — CFP, EA, & Owner, Brandon Renfro
Keep tax-efficiency in mind when choosing your investment strategy. The same investments can yield very different “in your pocket” cash amounts depending on how they are taxed.
The most common investment tax question you’ll have to answer is whether or not to invest in a Roth or tax-deferred account.
If you aren’t investing in a tax-advantaged account, then choose passive investments that you can hold for longer than a year to take advantage of lower long-term capital gains tax rates. If you are in a relatively low tax bracket, you may not owe any taxes on your investments at all.
Catherine Alford — Owner, Catherine Alford; Co-Founder, Millenial Homeowner
One of the best ways to invest money is in homeownership.
Unfortunately, many people buy more house than they can afford and rush into homeownership without a solid emergency fund.
When done thoughtfully and with enough of a financial foundation, homeownership can be an excellent way to build wealth, provide a safe place for a family to live, and provide diversity in a retirement portfolio.
Daniella Flores — Creator, I Like To Dabble
You want to go for something that is simple and low to no fees.
I use M1 Finance for a brokerage app that is also a robo-advisor to invest outside my 401k and Roth IRA (should first work on maxing these out before using an app like M1). They also have no fees and have tons of index funds available to choose from as well as individual stocks.
I also think one should always invest in themself with learning new skills. Starting a side hustle is one of the best ways you can do this because you can build on those skills with experience.
That side hustle could lead to passive income down the line just like investing in the stock market.
Josh Hastings — Owner, Money Life Wax
Personally, when I think of investing money, the normal answer you might hear involves the stock market, IRA’s, or real estate. However, I take a counter approach and always tell people – invest in yourself.
Cliche’ as that may sound, using money to invest in yourself is truly where you will see the most value.
This can mean taking your health seriously by ordering healthy dinners or hiring a personal trainer/joining a group fitness club. Investing in yourself can mean you get an Audible subscription and you listen to one personal development book a month. Or maybe you decide to use some money to get into meditating or taking some classes online.
Either way, here is the big secret with investing in yourself that most fail to recognize. When you invest in yourself – you will ultimately be healthier and energetic, thus you can take more action in your life!
Taking action is vital to creating multiple streams of income and living a full life, so don’t downplay investing in yourself!
Jamie Griffin — Owner, Mr. Jamie Griffin
The best way to invest money is to do it consistently and start as early as possible. When we started investing we adjusted our budget so we could invest the same amount every month, no matter what.
At first, our investments were small because that’s what we could afford, but since we started investing in 2015, we haven’t missed a month!
And as our income has increased, we’ve added more to our investing. Consistency pays off when you start looking at compound interest and the long term impact it will have on your financial trajectory.
Jonathan Verhaeghe — Owner, Joney Talks
There are tons of opportunities out there to invest your money: a savings account, the stock markets, real estate, bonds, cryptocurrencies, starting your own business, you name it.
Now before putting your hard-earned cash into one of these venues a crucial step is to first invest time by sitting down with pen and paper (and yes I know it is 2020) and define what you want to achieve with your money.
The questions you want to ask yourself are:
– What do I ultimately want to do with that money? Is it for a downpayment on a home? For my (early) retirement? For my kids’ college fund?
– When will I eventually need the money? This is your time horizon
– What amount can I afford to lose? That is your risk-tolerance
– Will I handle everything myself or should I consult with a professional? Reaching out for help might not be that expensive.
Once you have taken the time to answer those questions, your investment goals will become clearer and your strategy easier.
If you are in it for the long haul investing in a retirement account through your employer (401K) and other tax-advantaged accounts are easy ways to put your money to work and the contributions can be made automatically which is a fantastic time and brain space-saver.
For those with a higher risk appetite, investing directly in the stock markets and buying individual shares or ETFs is another option to grow your wealth over time, this will however require more research on the businesses/ETF and being able to keep emotions at bay.
Do not fall into the trap of following the news every day and focusing on the hot stock picks, this is what causes people to sell low and buy high. Boring investing beats sexy investing over the long run.
An additional tip, you should ideally diversify among sectors and mix it up with bonds so your returns are not solely dependent on one industry or only one asset class for example.
Investing in the real estate is another great way to build wealth over time and again whether you choose to invest in rental properties or fix and flips, the same principles apply: do your own research (check out Bigger Pockets), be diversified (geographically, type of investments,…) and see what could work for you. Investing in real estate is often associated with larger amounts of money but you can start for less than $100 by investing in REITs through the stock markets for example.
For shorter-term goals such as saving for a downpayment on your home or a wedding, you want to have the money at the ready when the time comes so putting it in a fluctuating stock market is not the right choice.
Good options for investing your money include high-yield savings accounts, CDs, the money market accounts, and Treasury bonds issued by the government. To be honest, I have only used high-yields saving accounts for my own personal short-term goals and keep my emergency fund in a high-yield account.
In summary, if you want to handle your investment yourself in 2020, you first need to invest time in defining your investment objectives and I also recommend you pick a personal finance book or two (I Will Teach You To Be Rich is an excellent pick).
Once that is done you can start investing keeping in mind your diversification, risk tolerance, and time horizon. It’s very important — you want to make the right choices that will let you sleep at night.
In the end, your money is there for you to help you live a better life not to become your number one worry or occupation.
Ricardo Pina — Founder, The Modest Wallet
The first step is to define your investment goal and time horizon. This will allow you to determine the best strategy for your needs.
In my opinion, the best way to invest money is via low-cost index funds. Index funds have generally lower management fees than other actively managed funds while allowing you to keep your investment well diversified. Another great advantage of index funds is that they are tax-efficient.
One last thing to remember is always to maintain a long term investment approach. Long term investments will help you take full advantage of compounding growth and will also help you ride out low market conditions.
Cyrus Vanover — Owner, Frugal Budgeter
You may have heard that real estate is a great way to invest your money. Monthly rental receipts are used to make the monthly payments and homes usually go up in value over time. But nobody likes being a landlord. Broken toilets, vermin infestations, and other tenant issues can consume a lot of your time and leave you with a big headache.
But there’s a way to enjoy the benefits of being a landlord without many common landlord issues. It involves investing in mini storage units.
With mini storage units, there’s no plumbing to worry about. Mini storage units are usually simple metal structures on concrete slabs. The best part of running mini storage units is that it’s now possible to completely automate business operations so that the owner can concentrate on other things. It’s no longer necessary to have an office on-site.
Debbie Gartner — Owner, Healthy, Savvy, & Wise
Once you’ve paid off debt and can cover your essentials, I’d recommend that you invest some of your earnings in a retirement plan (Roth IRA, Regular or 401K plan). Most of this is tax-free so you save money on taxes…up to the IRS limits which vary by year (and also your age).
Not only this, but you’ll be saving and growing money for your future. Compound interest is huge, especially if you can start in your 20’s. And, if you work for a company, some of them will match your contributions, so it’s basically free money that is tax-free and will grow – a win, win, win.
For bloggers and entrepreneurs, when you’re earning more money, you can create your own retirement and profit-sharing plans. We just did this for my S-Corp after I paid off $238,000 in debt. I’m playing catch up now, as I got off my retirement savings for more than a decade (ouch)!
Tom Blake — Owner, This Online World
In my opinion, if you’re considering investing, it’s important to be realistic with how much effort you’re willing to put into the process.
I think many guides and investing books stress investing in individual stocks and researching companies in-depth before making decisions. While this is a good approach if that’s your plan if you don’t put in the time to become an informed investor, a more passive approach could be superior.
For young adults especially, those who are focusing on career growth and growing their income, ETF investing or even using a robo-advisor might be your best option if you’re not willing to spend time researching stocks.
Personally, ETFs are my investment choice as I know I don’t have enough time between work, blogging, and other responsibilities to invest in individual stocks.
Ultimately, I think there’s no right answer for how best to invest, but it’s important to be honest with yourself about how much work you’re willing to take on.
Lance Cothern, Founder, Money Manifesto
In my opinion, the best way to invest money is dollar-cost averaging into low-cost index funds.
Dollar-cost averaging allows you to invest on a regular basis by splitting up your investments throughout the year. Doing this results in investing when markets are high, low, and everywhere in between.
The regularly scheduled investments reduce the temptation of trying to time the market, which can lead to disastrous consequences for the average investor.
Over time, your investments will grow as you hold on to them for the long-term. As long as you keep your eyes on your goal of long-term investing, dollar-cost averaging may help you reach your goals in a reliable way.
I find this preferential to trying to buy individual stocks or investments.
Investing in individual securities requires you to find opportunities and buy at the right time as well as figure out when a stock has reached its full potential to sell at the right time. Then, you have to start the process over to keep your money invested.
I don’t have the time, patience, or expertise for this, so I stick to my much simpler methodology.
Steven Donovan — Financial Coach, Owner, Even Steven Money
The best way to invest is going to be with your workplace retirement which allows you to invest money and save on taxes so your money can grow.
I personally keep my investments simple and stay away from fancy. You will find the majority of our investments in index funds that track the stock market.
Think hundreds or even a few thousand companies rather than just one company Invest in an index fund over and over for a long period of time.
It’s simple advice but also one of the best ways to invest money.
Bri Bell — Owner, Frugal Minimalist Kitchen
Use Financial Minimalism to keep your investing strategy as simple as possible!
Financial minimalism is like any other form of minimalism in that it’s about focusing on what really matters and eliminating the rest. When it comes to your investments, you definitely want to understand your portfolio and feel in control.
Instead of having your investments in multiple accounts, try limiting your investments to about 2 or 3. Think employer 401K up to their match, and a total market index fund investment.
Kyle Kroeger — Owner, Financial Wolves
The best way to invest is by maintaining an all-around, well-balanced portfolio. Investing is a long-term game. You should think of well-balanced as not only diversification but also by investment strategy and investment type.
First, I’m an advocate for investing in index funds as your primary means but with micro-investing, you can easily build a small portfolio related to speculation or growth investing.
In addition, consider alternative investments in your portfolio to gain access to non-correlated asset classes.
Your asset balancing is based on your age. If you are younger, you can allocate more resources towards growth-related investments and you can take more risk. As you get older, slowly balance the scales towards income and safer asset classes like real estate.
It’s all about allocation and positioning yourself to weather any type of storm. If you stay balanced and allocated appropriately, you won’t lose sleep worrying about your investment risk.
Jerry Brown — Owner, Peerless Money Mentor
In my opinion, the best way to invest your money is to spend it on education (formal or informal).
For example, since I’m a freelance writer in the personal finance space, I spend money on writing courses. Spending money on these courses has taught me how to negotiate my rates, find clients, and how to network.
The courses I’ve purchased have paid for themselves tenfold, and I expect their return on investment to increase long-term!
If you’re a writer, I highly recommend Holly Johnson’s Earn More Writing course.
David Pipp — Owner, Living Low Key
A little known, and rarely used, but incredibly valuable investment tool is a Health Savings Account (HSA). I know what you’re thinking, that’s for paying for medical bills right?? Yes, it is, and it can be a great way to invest your money to use for health care in retirement.
If you have a qualifying medical plan with an HSA, you should start taking advantage of this investment tool. Believe it or not, you can invest in an HSA the same way you invest in a 401K or IRA. There’s not a lot of difference there. What sets the HSA apart is the tax advantages.
The HSA is a triple threat when it comes to tax advantages over 401ks and IRAs. The first benefit is the tax advantage of contributing to your HSA. If you contribute directly from your payroll, it reduces your taxable income throughout the year meaning you’ll owe less in taxes. If you contribute through your checking account, it’s tax-deductible at the end of the year. Not to mention if your employer makes contributions to your HSA, that’s not considered a part of your taxable income.
The second benefit is that any interest, dividends, or capital gains you receive on your HSA investment account are tax-free! That’s right, you don’t pay taxes on the gains your account is making. Then when you withdraw funds for qualifying medical expenses, those aren’t taxed either. This beats out the traditional IRA and 401ks.
Lastly, there’s no use it or lose it policy with an HSA.
You can carry over the balance for as long as you want and you can contribute to your HSA until you hit 65 years old. The difference between the HSA and an IRA or 401K is that you’re not forced to make withdrawals once you hit 70.5 years old.
You can keep letting it grow in that HSA until you have a medical expense that you need to make withdrawals for, keeping in mind that qualifying medical expense means it’s a tax-free withdrawal!
There are a lot of advantages to investing in your HSA. If you’re not already, you should strongly consider this new investing tool!
Adam Olson — Co-Owner, Wallet Squirrel
Andrew (founder of Wallet Squirrel) and I believe in the dividend investing strategy. I am not as hard-core with this strategy as Andrew. He will only buy blue-chip stocks that are low risk with steady growth. These stocks MUST provide a dividend. When he receives dividends, he drips those back in for more shares.
While I believe in this strategy, I do not strictly follow it. I am a little more aggressive with my stock choices (recently buying into RKTs IPO). I also would rather invest in a stock that will grow more compared to what dividend stock might grow.
We both believe that this market can be a great opportunity to invest our money for the long term. Our strategy with the market is not a short term play.
Megan Robinson — Financial Coach, Owner, Goodbye To Broke
One of the best ways to invest money is through real estate. If I could go back, I would’ve started investing in real estate while I was in college.
I recently bought my first property. It’s owner-occupied, which means I live in the house and rent out a bedroom. This is called house-hacking.
You can also house hack with multi-family — duplex, triplex, etc. — by living in one unit and renting out the other. Investing this way allows you to live for free or very cheap. (I’m paying around $200 in housing expenses total, which is unheard of where I live.)
You can use the money you would be spending on rent or a full mortgage to pay off debt or save for your next investment.
It’s cliche, but also investing in yourself is some of the best money you’ll ever spend. But there’s a caveat: you only see a return on your investment if you take action and put your new knowledge or skills to work.
For example, I’ve invested thousands of dollars in coaching and online courses over the last few years. One of the business coaching programs I signed up for was $3,000. The coach was amazing, but I stalled out and didn’t implement the tools I learned. Therefore, the investment for me wasn’t worth it.
I spent another $3,000 on a health and fitness coach. For three months, I stuck to the program and followed it step for step. In the end, I gained 20 pounds of muscle, learned how to nourish my body, and felt more energized and productive than I had in years. For the results I got, I would’ve paid twice the cost.
So invest in yourself, but only if you’re committed to taking action and doing the work.
Drew Cheneler — Founder, SimpleMoneyLyfe
The best way to invest your money is by opening up a Roth IRA and investing in a Target Date Fund. This simple strategy automatically mitigates your risk, diversifies your funds, and helps you obtain your financial goals.
Do not fall into the rabbit hole of investing in individual stocks. This is risky, hard to do, and requires a significant amount of research.
A target-date fund will adjust over time as you progress in your career while still netting a strong ROI. This “set it and forget it” strategy works wonders if you set up a monthly contribution and max out your Roth IRA ($6000 annually) each year.
The earlier you start the better. This strategy helps thousands of Americans retire with a $1,000,000+ retirement nest egg.
Kevin Payne — Owner, Family Money Adventure
The past couple of years I’ve invested money into myself and it’s paid off big time. I was stuck in a job I didn’t love and stayed because it was easy and secure.
With the support of my wife, I decided to try and forge another path, becoming a freelance writer. Writing comes naturally to me, but I didn’t know how to start a business or find clients. I invested in an online course to learn.
Education has always been a struggle, but for some reason, online courses work well for me. They allow me to only focus on what I need to know without having to hunt down info or sift through all the fluff.
Within a year, I was making enough income writing to match my day job. I quit my job last November to become a full-time freelance writer and blogger.
Jordon Cox — Owner, Jordon Cox
You don’t always have to invest your money in massive corporations or big business. Some of the best returns can actually come at home.
If you have a friend or family member starting out a side hustle or small business – why not become a partner or investor?
Getting a stake in a business early can mean great returns if things work out. You can find template contracts online to make sure the legal side is covered and then work together to grow your money.
Tawnya Redding — Co-Creator, Money Saved Is Money Earned
I think there are really two best ways to invest money.
The first is to invest in yourself, which could look like a lot of things. Although how you implement this investment could be really broad and different for each person, the biggest return you’ll get for your money is to invest in making yourself better.
That could mean advancing your education or credentials to get a better job or simply learning new skills and knowledge to make yourself more informed and valuable.
Other than investing in yourself, the best and easiest way to invest your money is to invest in low-cost index funds. These funds help you to invest in a broad range of top companies (such as the S&P 500) and change depending on which companies are at the top. This way, you are protected if any one company fails, unlike with individual stocks.
Chhavi Agarwal — Owner, Mrs. Daaku Studio
Rental housing (or vacation rentals) is a great way to invest your money and reap returns.
With platforms like Airbnb, you can easily find travelers across the globe ready to use for property for short as well as long term stay. And, you know what the best part is — if you rent it out to travelers, you don’t even have to deal with tenants (which, sometimes, becomes a stressful situation).
With Airbnb, you don’t have to manage the money and your property is insured in case the guests are unruly. Depending on where you buy the property, you can easily make $100 a night.
While properties are not easy to buy and manage, over time, the rent and value of the right property increase and will boost your net worth.
If you consider this type of investment, remember, you should have stable foreseeable cash flow because the property is the least liquid asset. Meaning, it takes time to sell it in case you’re in need of cash.
Austin Weyenberg — Founder, The Logic Of Money
The best way to invest your money is to invest early, invest often, and to automate.
The number one mistake people make with investing, is they start investing too late. Waiting a few extra years before you start putting money away could end up costing you thousands, if not hundreds of thousands (or more) in the long run.
Even if you can only afford to put a few dollars away each week right now, it can end up being a huge amount of money down the road because of the magic of compound interest.
The second mistake people make is they don’t invest regularly.
People often invest a lump sum of money and then don’t invest more money until several months or years later.
Other times, people will try to “time the market” and invest right before they think a stock will go up. This usually results in losing lots and lots of money. No one knows with certainty what will happen in the market unless they have inside information, however, that information is illegal to invest in.
It is important to invest regularly through the ups and downs of the market and dollar-cost average of your holdings. Over time, this will give you the best, most stable investment returns.
This leads to automating. If you automate your investing and have the patience to let your investments grow, you will be very happy with your results in 10, 20, 30+ years. Treat investing almost like paying a bill.
Set up an automatic transfer each month that automatically invests in a set strategy each month. Then check it once or twice a year to rebalance your portfolio. If you look at your investments too often, your emotions will take over and you will start to make unnecessary trades that will cost you money in the long-run.
Kari Lorz — Founder, Money For The Mamas
The very best way for you to invest your money is whichever way you are comfortable with! Now, don’t get me wrong, you may need to stretch your comfort zone a bit, as there has to be some level of risk in investing (it’s just how it is).
Yes, usually, the greater the risk, the greater the potential gain. Yet, if you are stressed out to the max, constantly worried as to what would happen if you lost your entire investment (which is possible), then that form of investing is not for you. Don’t do it! Step away and keep your sanity!
Find your perfect risk tolerance match; it’s out there! Say you like how real estate is trending, yet you don’t want to be a landlord, then consider investing in REIT’s. Or maybe you love the consistency of large-cap stocks, but choosing which to invest in is crippling your decision, as you only have just so much money and you don’t want to make a wrong choice, then choose an INDEX fund, like the cult classic VTSAX.
Always remember that you can gain a lot with investing, but that there are three main enemies to the successful investor – fear, greed & impatience. Don’t make any of your decisions based on those emotions, and you will do fine.
Paul Merriman — Founder, Paul Merriman, & Merriman Financial Education Foundation
The key to successful long term investing is determining the right balance of equities (offense) and fixed income (defense) that address your need for return and risk tolerance. That requires an analysis of what your personal need for return is and what your risk limits are likely to be.
For investors who are not sure what that combination should be, the best answer is to let someone else do it.
The most cost-effective and best likely outcome is to invest in target-date funds. As it is imperative to maximize your diversification and minimize your expenses, target-date funds that are built with index funds are by far the best answer. All target-date funds are managed with your expected retirement date in mind.
By far the most popular family of target-date funds is Vanguard. Their long term returns are likely to be in the top 20% over long periods of time. For example, according to Morningstar, the Vanguard 2035 Retirement Date Fund is in the top 15% of all competitors for the last 15 years. They outperform the average fund by over .5% a year.
For do-it-yourself investors, I suggest a combination of a target-date fund and a second fund to add some extra risk and extra return. We call it 2 Funds for LIfe.
The combination of the date fund and the second fund are easily computed once a year. Multiply your age by 1.5 and that is how much you invest in the TDF. The balance can be invested in large or small-cap value.
Suchot Sunday — Owner, The Curious Frugal
For most people, the best way to invest is: automated, regular, simple, passive.
By automating investing, you move money every month into the investments you choose, instead of trying to time the markets. Nobody knows what the markets will do in the future, not even Warren Buffett.
By regularly investing, say monthly instead of one lump sum a year, you take advantage of dollar-cost averaging. This means you will automatically be buying more shares when the price is low and fewer shares when the price is high.
Keep it simple when it comes to investing.
You shouldn’t be spending hours each week checking your investments and making changes. Following an investment strategy such as index fund investing is a simple, fairly passive way of investing that long-term has averaged annual returns of ~10% per year.
Matt Frankel — CFP, Personal Finance Expert for The Ascent
There are a few factors to think about when it comes to the best ways to invest money.
Three of the main things to consider are your timeframe, risk tolerance, and liquidity requirements. In other words, how long do you plan to keep your money invested? Could you afford to lose some or all of your investment if things don’t go well? And do you need ready access to your money?
For most people, the stock market is generally the best place to invest money you won’t need for at least another five years.
The stock market can be highly volatile over short periods of time. But over long periods, it has generated annualized returns in the 9%-10% range. And, stocks are liquid — you can convert your investment into cash in seconds with the click of a button.
If you aren’t comfortable choosing your own stocks, there’s nothing wrong with creating a portfolio of low-cost index funds and letting time do the heavy lifting for you. You can even use a robo-advisor service and put your investing completely on auto-pilot.
Now, for investment dollars you’ll need in five years or less, you’re better off sticking with shorter-term vehicles like CDs and high-yield savings accounts. Look at reputable, online-based institutions, as these often pay significantly higher interest rates than branch-based ones.
CDs tend to have the higher interest rates of the two, but be sure you’re willing to commit your money for the entire term of the CD (usually six months to five years), as most have early withdrawal penalties.
Lauren & Steven Keys — Owners, Trip Of A Lifestyle
There are two keys to investing money: understanding risk and staying consistent. The second is dependent on the first because if you don’t understand the magnitude of the risks you’re taking, you will have a tendency to be an emotional investor, leading to inconsistency in your actions.
When it comes to investing, you should never expect an increased potential for reward without increased risk as well.
Traditional investment classes include stocks (high risk/high reward), rental real estate (high risk/high reward), and investment-grade bonds (low risk/low reward). When you invest money into a higher-risk asset class, make sure you’re comfortable letting that investment grow undisturbed for a long time (at least 10 years).
In the long run, high-risk investments tend to perform well, but there may be wild price fluctuations along the way, meaning your money might not be available for withdrawal when you need it.
If you’re interested in stock market investing, consider looking into low-cost, broadly diversified index funds. They’re easy to buy and hold for a long time, and they automatically keep your money invested into a large number of different companies.
This strategy has performed very well in the past, and it has a tendency to make you stay invested consistently, rather than trying to speculate on what particular stocks might do in the short term. You can buy index funds through any brokerage account — just make sure you avoid all trading fees.
Kristy — Founder, Money Bliss
The best ways to invest money must be centered around diversification. In layman terms, that means don’t put all of your eggs in one basket.
Start with an S&P 500 index fund to get you in the stock market. After building up a sizable nest egg, then start to invest in real estate.
The savvy trick to investing is to make sure you are always making money on your money (even on a high yield savings account).
Another savvy secret is to continue to be active in your investments and a constant learner. Read a few of the best investing books on the stock market. There is a lot of solid advice offered for a fraction of the price of a Certified Financial Planner.
As you gain more investing knowledge, you can branch out into real estate investing or possibly financing a business or other project.
Final Thoughts On The Best Ways To Invest Money
Phew! As you have figured out by now, there is definitely NOT a one-size-fits-all answer when it comes to investing.
I mean, real estate investing won’t work if you’re on a lower income in a high cost of living area, and a traditional 401K may not be so practical if you don’t work a traditional 9-5 job!
What matters the most, regardless of which of the above methods you’re planning on focusing on for investing money to make money, it’s important to understand what you’re getting in to and know when to call in an expert. The last thing you want to do is set out to invest and make some money and quickly lose a ton of it instead!
We truly hope this list of expert advice gave you plenty to think about and even more inspiration to get those investments right!