12 Best Investments in 2021 for Any Investor
Investing doesn’t have to be confusing.
That’s why we’re giving you a run-down of the best investments you can make, depending on your desires.
Maybe you’ve recently come into some capital, or maybe you’re looking to turn some spare cash flow into a nest egg, but you don’t know how to invest. The good news is that, when it comes to investing, there really is something for everyone.
Whatever amount of money you begin with, selecting appropriate investments will enable you to grow your wealth over time.
We’ll begin by outlining the most profitable investments for this year—some that you’ll have heard of and some that might surprise you.
Software as a Service
Software as a service (SaaS) has the potential to be one of the biggest money makers in the world of online business. SaaS refers to cloud-hosted software that can be used in a web browser without the need to download anything or acquire a license.
This ease of access has made SaaS products popular among people and businesses alike. G Suite, Google’s email service, is a significant example of this type of business, one that you might use every day.
But there are many others, and they’re being created all the time in almost every niche you could imagine, whether that’s accounting software like Quickbooks or a file-sharing service like Dropbox. It’s a market full of potential.
Why am I telling you about SaaS in an investing article?
Investors have started to acquire SaaS companies in a similar fashion to real estate. This is because the SaaS business model earns recurring revenue and is even more highly scalable than real estate.
Entry point: The price to enter this space will range from tens of thousands to millions of dollars. If you have no coding experience, you may want to avoid buying smaller businesses as they are likely to be more hands-on. More capital opens the door for an investor to buy a company that has a dedicated team in place to run things.
Where to purchase SaaS businesses: It’s best to work with a broker when acquiring businesses as they can find deals for you. Check out this SaaS marketplace to see what businesses are currently for sale and how much they earn per month.
Return: This model can be very profitable, and SaaS owners can expect to get a return on investment (ROI) in two to six years, should the asset maintain its profitability. A bonus of this kind of investment is that it’s possible to scale up profitability by acquiring more customers. This has a two-fold benefit: it not only speeds up your ROI (potentially to less than two years) but also makes your asset more valuable, meaning you could sell for a profit.
Risk: When dealing with an investment that involves consumers, there’s no guarantee that they’ll stay loyal to the product. This means that scalability also works in the other direction: if a product starts to underperform or a competitor grows, your customers might go elsewhere. If profit starts to decline or even disappear completely, then it becomes difficult to get back any of your investment. Having a skill set in hiring and managing people can help to mitigate these potential risks.
Amazon FBA, which stands for fulfilled by Amazon (FBA), is a business model that allows businesses to sell products on their very own Amazon storefront.
Unbeknownst to many people, Amazon allows third parties to sell products on their marketplace and use their warehouses to store and ship the products—hence the “fulfillment” aspect of the model.
This type of business can not only become very profitable but can be managed in a hands-off way. Some common tasks may include customer service and inventory management, both of which could be handled by a virtual assistant.
Entry point: Similar to SaaS, an Amazon FBA business will cost anywhere from tens of thousands to millions of dollars. Because this business model requires less technical experience, purchasers usually have more options when looking to acquire one. This makes it suitable for most investors with a medium to a large amount of capital to invest.
Where to purchase an FBA business: Take a look at the Amazon FBA marketplace to see what’s available to buy and for more information on how specific businesses are being run.
Return: We conducted a data study on the ROI of an Amazon FBA business to analyze what happens after people buy. One of the main takeaways was that, of 31 data-driven interviews with FBA business owners, 71% reported that their businesses grew or maintained their net profits. Out of this number, 42% were first-time buyers and the rest were portfolio or repeat buyers looking to gain another source of income. Some of the investors interviewed saw a return on investment in just 12 months.
Risk: When dealing with physical products, the supply chain becomes very important. Also, while using a company as big as Amazon has benefits, it also has downsides, including a competitive marketplace. The data study shows that some buyers sustained losses and that high-yield investments come with volatility.
Content sites are any website that earns income from advertising and/or affiliate marketing.
Affiliate marketing is when companies pay you a commission every time you help them make a sale by promoting their products. These commissions can range anywhere from a few percent to greater than 50 percent, and companies that use affiliate marketing include ones as big as Amazon and Nike.
Content websites have become a cornerstone of the internet; if you’ve ever Googled a product review or guide, then you have probably clicked on a content site. People are accessing the internet more than ever, so a website might represent a good investment to get into promptly.
With such an abundance of sites available, diversifying by buying multiple sites to create an investment portfolio is an option.
Entry point: Content sites have one of the biggest variations in price, so they will appeal to a variety of investors. Sites with prices in the tens of thousands of dollars are likely to require more hands-on work, while sites at a higher price give you the ability to have a team run things for you.
Where to purchase content websites: Many marketplaces list websites for sale, but you should be wary of where you acquire one. It’s best to work with a broker that vets sites before they’re listed. This helps prevent you from wasting time scrolling through unprofitable sites. To see some profitable sites and get ideas for investment opportunities, take a look at our marketplace.
Return: Like the other investments mentioned above, a content site has the potential for very high returns. We published an ROI study for content sites that interviewed 30 buyers to see how their businesses fared after their purchase. While this is only a small fraction of the deals we make, 64% of the interviewed buyers maintained or grew their investment. Some investors tripled their monthly net profit, making for a very profitable acquisition.
Risk: Most sites drive their traffic through search engine optimization and Google ranking. Reliance on this and competition from other sites are risk factors that, if not monitored, can cause your net profit to fall considerably. Performing thorough due diligence before acquiring an asset of this kind is paramount to its success. If you aren’t versed in online marketing, then hiring someone who is, or buying an asset that comes with staff will minimize the risk.
Buying individual stocks, or stock trading, is the quintessential form of investment.
When buying individual stocks, you acquire a share ownership of the chosen company. These shares then become available to trade on the stock exchange, which is where the classic phrase “buy low, sell high” comes from.
While this phrase presents one way to profit from individual stocks, it makes this investment strategy sound simplistic. “Buy low, sell high” is not the full story, and this type of investment is best described as high risk, high reward.
This investment strategy can be exciting and has its place in a successful investment portfolio, but you should dedicate only an amount of money that you would be comfortable losing.
Another benefit to consider is the lower taxation of stocks. For stocks that are held for more than a year, profits are subject to a capital gains tax usually set at 15%, which is lower than for other taxable income. Also, no tax is paid on the appreciation of stocks, so while your money is invested, it’s not subject to tax requirements.
Entry point: There is no minimum value to start investing in individual stocks. If you’re placing trades on your own, we recommend beginning with small trades to get used to the process of buying and selling. Some brokers offer management services, either advising you or completely managing your stocks, but this comes at an extra cost.
Where to purchase individual stocks: Many stockbrokers offer zero-commission trades, including Merrill Edge, E*Trade, and Interactive Brokers. If you’re looking for a broker that will be more involved and manage stock trades on your behalf, then be diligent about choosing a reputable one.
Return: Technically, the potential returns are limitless, but they are very hard to predict due to the nature of the market. On the S&P 500 Index, which is made up of America’s 500 largest publicly traded companies, the return over the past 30 years has been positive. Year by year, there have been ups and downs, so you must be able to ride out this volatility to make a profit.
Risk: The stock market can move very quickly, and it’s possible to go from making profit to making nothing in a short time. Even the largest of companies are not immune to big losses; the pandemic was a reminder of how true this is.
Dividend Stocks and Funds
Dividend stocks allow people to invest in companies and earn payouts, known as dividends, from these profitable companies.
Typically, companies that offer dividends are more established and stable, which makes them a more reliable investment than individual stocks. They’re also a source of regular income, as payouts are usually structured quarterly.
If you see potential in a dividend, it’s possible to directly reinvest your profits, a strategy known as a dividend reinvestment fund. This allows you to buy more shares without taking more money out of your pocket.
Index funds and exchange-traded funds (ETFs) offer the chance to buy dividends from multiple companies within one purchase. This gives you diversification, mitigating risk should one company fail to pay out.
Entry point: Dividends can be acquired with very little start-up capital but they are more of a longer-term investment. Overall, dividends are a great investment opportunity that anyone looking to invest spare capital should consider.
Where to purchase dividend stocks: Most online stock brokers offer dividend stocks.
Return: The metric that determines the amount of dividend to be paid out is called the dividend yield. The payout is calculated by dividing the dividend per share by the stock price per share. Most brokers will show this figure alongside the dividend investment opportunity. A yield of four percent is considered to be the threshold for a safe dividend; anything higher than that is a riskier investment.
Risk: Sticking to the dividend yield mentioned above ensures you’re investing in companies that are likely to remain stable, but there is no guarantee. Using an index fund is one way to help minimize this risk.
Government bonds are a way for governments to raise funds to put toward operating costs. If you buy these bonds, they’ll pay you interest on a regular basis; this makes it a fixed-income investment that doesn’t require you to sell to make money.
Because these bonds are issued by a government, such as US government treasury bonds, they are as safe an investment as you can make. The downside is that they tend to earn low interest, which makes them a low-yield investment.
Owning multiple types of government bonds is possible, but diversification is less important when dealing with safer investments.
Entry point: Government bonds represent a smart investment for most people. As long as you understand that it’s more suitable for long-term goals rather than a speculative investment, it should be beneficial to you.
Whether you’re a younger adult looking to store spare capital for a nest egg or a retiree happy to invest in less risky, lower return investments, government bonds could be the right investment. The market for government bonds remains liquid at most times, so you should have no problem selling if you decide to make an exit.
Where to invest in government bonds: Government bonds can be bought directly from the US Treasury or through an online brokerage account.
Return: Interest for government bonds doesn’t usually go above a few percent. Thirty-year bonds will have a slightly higher rate of return than shorter-term bonds. One to two percent would be the average.
Younger investors are likely better off dedicating only a small portion of their portfolio, say 20%, to government bonds. A younger investor should be able to ride out the volatility of stocks for a more profitable long-term investment.
Risk: While government bonds are not volatile in the same way as stocks, a different kind of risk is associated with an investment of this type. Because it’s a fixed-income investment, if interest rates rise elsewhere, then the government bond becomes a less attractive asset class and its price will fall.
These bonds are also susceptible to rises in inflation. If the cost of living inflates higher than the interest rate return, then your purchasing power decreases.
Corporate bonds operate in the same way as government bonds, but they are offered by corporations and companies to raise investments.
If you buy corporate bonds, you will receive interest on your initial investment. The nature of corporate bonds makes them a riskier investment than government bonds as they are not a government-backed investment.
This also means it’s possible to find bonds with higher interest rates. Short-term bonds of up to five years are more commonplace with corporate bonds than government ones and can earn investors a higher yield.
Entry point: The amount needed to invest in corporate bonds will vary. To buy a single bond, the buy-in, or face value, could be anywhere from $1,000 to $10,000. If you don’t want to invest this much, then units can be bought for a smaller amount.
It’s possible to diversify your investment by buying into bond funds, which will buy units of many different bonds for you. This makes corporate bonds an appealing investment to most, as long as you have the risk tolerance to deal with an additional amount of risk when compared to government bonds.
Where to purchase corporate bonds: Online brokers will have corporate bonds for you to invest in, but some bonds may go straight into a bond fund rather than to the market. For this reason, they aren’t as liquid as government bonds, and the reselling market tends to be more difficult.
Return: Companies of various sizes offer corporate bonds, so the return depends largely on the particular investment. As a general rule, you’ll be looking at three to four percent for a highly rated bond. If you start going higher than that, it becomes higher risk.
Risk: If you choose a bond from a large company, there is minimal risk. As the yield increases, the company is usually considered to be riskier. Bankruptcy would obviously be the worst-case scenario, and your total investment would take a big hit, but this risk can be mitigated by buying bonds from more established companies.
Real Estate and Real Estate Investment Trusts (REITs)
Real estate is one of the most well-known investments, largely because it is easier to conceptualize ownership of something physical than some of the other investments we’ve talked about.
Most people will have some involvement in the real estate industry at some point, whether they consider it an investment or not. Using real estate as an investment can take a few different forms.
The first is buying and selling for a profit, either by improving the property or through appreciation over time.
Rental housing can also be a profitable investment. If you have enough funds, then buying a portfolio of housing and renting it out can collect monthly income and pay off the housing’s value at the same time.
Logistically, a lot goes on with real estate investment. You may have to be comfortable dealing with tenants and contractors, but real estate can be a profitable investment that improves with time.
If you don’t want to go down one of these routes, there are other ways to invest in real estate. One is through real estate investment trusts (REITs), which are trusts that own a collection of properties and pay you dividends on their income.
Entry point: Real estate is accessible in the large part only to medium to high-net worth investors. You need to be very sure you have the spare cash to invest in real estate as it’s one of the least liquid investments available. REITs make real estate open to a wider range of investors, but they are still considered a long-term investment and might not suit all types of investors.
Where to invest in real estate: Property brokers or letting agents will have a list of properties available in your area. REITs can usually be accessed through online stockbrokers.
Return: Investing in real estate is a means of diversification for many investors. Rental yield can vary, but a good investment in real estate can fall around 7% gross profit. This does not take into account any taxes or additional expenses that owning property might incur.
NAREIT, an association that represents many REITS, found that the average compounded annual growth rate over the past 20 years was 9.9% for REITs. This return is higher than that of most bonds, but real estate as a whole has a slower ROI than similar types of high-entry investments mentioned in this article.
Risk: Acquiring the right property is paramount to the success of this investment strategy. Overspending on the initial investment can result in thin profit margins and leave you at risk should any problems arise with the property. The volatility of the market can also be an issue, meaning depreciation can make it difficult to recoup your large investment.
If you liked the sound of some investment strategies we’ve discussed but aren’t quite sure how to choose the best opportunities or don’t have the time to manage investments, then a mutual fund might be for you.
Mutual funds gather up money from many investors and invest it in a portfolio of stocks, bonds, and other assets. Each mutual fund has its own set of objectives, which will help you find the right fund for you.
Mutual funds are managed by an investment professional, which not only takes a lot of work off your hands but also offers diversification across many investments. By placing your investment within a portfolio, the fund manager minimizes the risk associated with a single investment. Mutual funds often include hundreds of different stocks, something that wouldn’t be feasible for the average investor alone.
Several variants of mutual funds exist, such as exchange-traded funds (ETF) and one of the most popular; index funds. Index funds are a type of mutual fund that invests into one specific market, such as the S&P index.
The main difference between mutual funds and index funds is that index funds don’t require as much professional management, so they are less expensive. A lower expense ratio opens up this investment strategy to a wider range of investors.
Entry point: Mutual funds are available from a few hundred up to millions of dollars, depending on the estimated return. There is usually a higher cost for an investment like a mutual fund that needs to be more heavily managed. You will have to weigh up balancing the cost against the potential return, but both mutual funds and index funds will appeal to long-term investors or retirees who are happy to see their investment grow over the years.
Where to invest in mutual funds: Most online stock brokers offer these investment opportunities, or as do the finance companies that manage mutual funds.
Return: Mutual funds tend to have a higher return than index funds as they are managed with the aim of beating the market. Getting an ROI for index funds is slightly easier than mutual funds, as they are based on the market’s largest companies. The S&P index, for example, has returned an annual average of 10% historically.
Risk: All of the mutual funds mentioned here are considered fairly low-risk investments. Because they do not rely on one single investment, you benefit from diversification.
Money Market Funds
Sometimes called money market mutual funds, this investment type is similar to mutual funds, but the portfolio will include only debt securities. This makes money market funds a very low-risk investment.
Investors might use a money market fund to keep cash available for other, more profitable investments. Typically, there are no entry or exit charges and the funds are very liquid, so it’s easy to get quick access to your cash.
Storing cash in a money market mutual fund also makes it exempt from federal tax.
Entry point: The minimum buy-in can vary from approximately $500 to $5,000 but anyone who wants to store some extra capital should look into a money market fund.
Where to invest in money market funds: Online brokers and some online banks offer money market funds.
Return: Investors can expect a yield of around half a percent to a few percent, depending on the current state of the market.
Risk: Although money market funds are considered a safe investment, they aren’t always FDIC insured while some other low-risk investments are.
Certificates of Deposit
Certificates of deposit (CDs) are bank accounts with a fixed interest rate for a set period of time.
CDs have higher interest rates than most savings accounts as your investment is locked in for a set period. Three-month, six-month, and full-year increment CDs are the most common; upon completion, you get your initial investment back plus interest.
A CD’s interest rate is an annual figure, but most will compound monthly before you withdraw the lump sum and interest at the end of the term.
Entry point: CDs are available to everyone and are a great way to set spare money aside. They won’t be for every investor, but they represent a safe investment that will grow your money more than traditional bank accounts.
Where to invest in CDs: Most online banks offer some form of CD, but it’s important to shop around for the best interest rate. Interest rates vary greatly, so you could miss out on receiving a higher rate if you don’t do your research.
Return: The return will be higher than most savings accounts, but you’re still looking at an annual percentage yield of only around half a percent.
Risk: CDs are very safe investments because their rate is fixed, so you will not earn less than advertised. Even in the worst-case scenario of a bank collapse, choosing an FDIC-insured CD provides you with US government support.
High-Yield Savings Accounts
High-yield savings accounts are a good investment for almost everyone. They won’t make you rich, but they do offer a safe place to store an emergency fund.
Some online savings accounts come with a limited number of withdrawals per year, so make sure to keep it separate from your day-to-day funds.
One type of high-yield account is known as a money market account. This account will usually offer better interest rates than a traditional bank but will have a limited number of transactions each month. It can also come with a debit card which makes accessing your money easier should you need to withdraw it quickly.
Shopping around the online banks will help you find a deal to suit your needs. This type of investment should be used to manage the backup fund of your portfolio, freeing up your other capital to invest in opportunities with more aggressive returns.
Entry point: Pretty much anyone can open a savings account as a safe place to store additional capital that they need only irregular access to, or as an emergency fund.
Where to invest in savings accounts: Online banks will offer a variety of high-interest saving accounts, which you should compare to find the best deals.
Return: You’ll be looking at an annual interest rate of around half a percent, depending on the terms you’re comfortable with.
Risk: Online savings accounts are about as risk-free as you can get but, as with all savings accounts, there is inflation risk.
Tips for Choosing the Best Investment for You
You should assess a few key factors before deciding which investment to pursue:
- How much capital do you have to invest?
- For how long can this money be invested?
- How involved do you want to be?
- What’s your risk versus reward tolerance?
Using these four points to write out an investment plan is a great start. Putting your financial goals in written form will help you better match them to the investment opportunities we’ve outlined.
Also, remember that if your capital allows it, you don’t have to just pick one investment strategy. Setting up your portfolio across a spread of these investments will set you up for continued success.
For example, a moderate-return portfolio could be structured like this:
- High-return investment (stocks/digital asset): 20%
- A collection of bonds, dividends, and funds: 60%
- Savings accounts, CDs, or money market funds: 20%
This would create a balance that would, hopefully, set you up to ride out any short-term losses and grow your investment moderately over time. Establishing a balanced and well-performing portfolio could even fund your retirement on its own.
If the idea of owning a digital asset like a SaaS business, Amazon FBA store, or content site has piqued your interest, take a look at our marketplace. We feel that these investment options stand up incredibly well compared to other high-performing assets like stocks.
If you have the capital to invest, set up a call with one of our business analysts, who will find opportunities tailored to your needs.
Hopefully, this run-down of the best investment opportunities has given you some ideas, so you can start growing your wealth for a better future—that’s what investing is all about.