7 Best Investments for Automated Compound Growth: Beyond ETFs
Automated compound growth is a strategy that allows your investments to grow over time as the earnings from interest or dividends are reinvested. While many people believe that ETFs (Exchange-Traded Funds) are a primary tool for these strategies, other investment options also offer this benefit. Below is a detailed look at seven of the best compound interest investments that can boost your savings.
1. Certificates of Deposit (CDs)
Certificates of Deposit (CDs) are a safe investment offered by banks. They generally offer higher interest rates than savings accounts and are federally insured time deposits. CDs pay interest at regular intervals, and at maturity, you receive both the principal and the accumulated interest. You can choose a short-term or long-term CD depending on your needs and risk tolerance. If you need a steady stream of income in the future, CDs are a good long-term investment.
2. High-Interest Savings Accounts
High-Interest Savings Accounts are a good choice for those who need quick access to their funds. While they typically have a slightly higher cost than other savings options, the higher interest rates make them worthwhile. These accounts offer a competitive interest rate on your deposits, and the earnings are added back into your account. Keep in mind that while the risk of inflation is present, these investments are relatively low-risk.
3. Rental Properties
Rental Properties can provide passive income, but they come with their own set of challenges. As the property owner, you are responsible for managing and maintaining the asset. If you have a reliable tenant and a well-maintained property, rental income can be significant. However, if the rental market is tough or the property is not occupied, the return on investment can be limited. Paying down the mortgage on a rental property can provide long-term and steady cash flow.
4. Bonds
Bonds are an excellent option for those seeking steady, gradual growth. The various types of bonds come with different risk factors. Government bonds are the safest, as they are backed by the U.S. government, but they are subject to economic fluctuations. Municipal bonds are issued by state and city governments and are riskier, but backed by municipalities. Corporate bonds are the riskiest, but have the potential for higher returns. Careful selection is key to benefiting from bond investments.
5. Stocks
Stocks can provide higher returns than other investments, but they also come with higher risks. Dividend-paying stocks offer an additional income stream, but you need to be careful in your selection. Preferred stocks are less common and also depend on the specific stocks you choose. If you are familiar with the stock market, stocks can be an excellent way to grow your investment over time.
6. Treasury Securities
Investing in Treasury Securities allows you to participate in government projects when the government needs funds to cover debts or invest in projects. Treasury bills, notes, and bonds are sold at face value and return the full value at maturity. Treasury notes can be held for a few months for a short-term turnaround, but selling them before maturity can result in a loss. If managed properly, Treasury Securities can offer a stable return to your investment account.
7. Real Estate Investment Trusts (REITs)
REITs are a company that invests in real estate and provides income from rental properties. They offer a way to own real estate without the hassle of management. As a public trust, REITs can provide stable, long-term returns. Long-term investments in publicly traded companies can benefit from the steady income provided by REITs.
Choosing the Best Investment for You
Compound interest investing is an excellent way to build a comfortable nest egg for retirement. However, as with any investment, it is important to consult with a financial advisor. Proper due diligence is crucial to ensure that the investment aligns with your financial goals and risk tolerance.
About the Author
Regina is a member of the Horizon Trust Team and has experience in financial management. If you're interested in looking into CD's and other similar investments, visit Horizon Investments’ website.