And for still more wisdom from a recent edition of U.S. News Invested, here are some very useful tips for even modest investors with only small sums to commit, all of these pretty much as close to risk-free as you can get. As always, you can click on the link to get more details. Hope everyone is enjoying this warm weekend.
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Holding cash these days is a losing proposition. With inflation figures hitting an 8.6% increase year over year in June, every dollar in your pocket is worth less and less as time goes on. Instead of stuffing your cash in a mattress to lose value over time, consider investing it instead. With markets down heavily recently, investors can find a variety of great assets, whether they be stocks, bonds or alternative investments, on sale at bargain prices. For younger investors in the accumulation phase, a bear market is one of the best times to start a long-term investment portfolio. Buying one of these assets can be a great way of warding off inflation and even making a decent return on your investment. Here are seven of the best ways to invest $5,000 in 2022 for short- and long-term investors alike:
Series I savings bonds. Series I savings bonds are U.S. government-issued fixed-income securities that pay an interest rate based on two factors: a fixed rate, and a variable inflation-based rate. When inflation runs high (like right now), I bonds pay a juicy yield. Case in point: The annual interest rate for I bonds issued between May 2022 and October 2022 currently sits at a whopping 9.62%. These bonds are virtually "risk free," as they're backed by the full faith and credit of the U.S. federal government. Investors can hold I bonds for up to 30 years and can cash them after one. However, if you cash an I bond before five years, you lose the last three months of interest payments. The downside to I bonds is that you can only buy $10,000 total per calendar year electronically via TreasuryDirect.
Berkshire Hathaway Inc. (ticker: BRK.B, BRK.A). Warren Buffett's flagship company, Berkshire Hathaway, is an excellent core portfolio holding for new and experienced investors alike. The company can be thought of as a fund at this point, due to its sizable investments in blue-chip U.S. stocks like Apple Inc. (AAPL), Bank of America Corp. (BAC) and Coca-Cola Co. (KO). Year to date through July 7, Berkshire Hathaway is only down 6.6% compared to the 18.1% loss in the S&P 500, a testament to its resiliency and Buffett's value investing philosophy. Berkshire shareholders have traditionally enjoyed market-beating performance over long periods of time, especially when Buffett puts Berkshire's cash reserves to work during buying sprees. Investing in Berkshire gives exposure to a portfolio of Buffett's hand-picked stocks, allowing investors to reap the benefits of his long-term value investing philosophy.
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7 of the best ways to invest $5,000: - Series I savings bonds
- Berkshire Hathaway Inc. (BRK.B, BRK.A)
- Vanguard S&P 500 ETF (VOO)
- Vanguard Total World Stock ETF (VT)
- Target-date funds
- Certificates of deposit (CDs)
- Money market accounts
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