Twenty Investment Strategies to Save for Your Future

Investing is a crucial step towards building wealth and securing your financial future. With a myriad of investment options available, it’s essential to understand the different avenues where you can put your money to work. Whether you are a novice investor or looking to diversify your portfolio, this guide will walk you through some of the most common investment options.

From stocks that offer ownership in companies to bonds that provide steady income, and from mutual funds that pool resources to real estate investments, each option comes with its own set of benefits and risks.

In this guide, we will explore the world of investment strategies, examining definitions of each investment type, how returns are earned and associated risks. By exploring these various investment vehicles, you will be better equipped to make informed decisions that align with your financial goals, risk tolerance, and investment timeline, leading to financial empowerment and better partnership with a wealth advisor¹.

Note: We have included a glossary of unfamiliar terms at the end of this post – if you are unsure what a term means in this context – check there!

Stocks: Represent ownership in a publicly- or privately-traded company and offer potential returns through price increases and dividends. Generally, shares are purchased via a brokerage account and are traded on exchanges like Dow Jones, NASDAQ and S&P 500. Stocks are considered high-risk investments due to market volatility and company-specific risks.

          Best for: Long-term investors seeking growth potential

Bonds: Debt securities issued by entities such as governments or corporations, providing fixed interest payments. They are generally lower risk than stocks but can be affected by interest rate changes and credit risk of the issuer.

          Best for: Conservative investors seeking steady income.

Mutual Funds: Pool money from many investors to buy a diversified portfolio of stocks, bonds, or other securities. They offer moderate returns with risks depending on the underlying assets.

          Best for: Investors seeking diversification without direct management.

Exchange-Traded Funds (ETFs): Similar to mutual funds, EFTs hold a collection of assets such as stocks and bonds, and they trade like stocks on exchanges. ETFs, however, are traded throughout the day and can be purchased for the price of one share. They offer diversification and are generally lower risk, though they can be subject to market volatility and tax implications.

          Best for: Investors looking for low-cost, flexible, diversified investments.

Index Funds: Mutual funds or ETFs that track a specific market index. They offer moderate returns with lower risk due to diversification.

          Best for: Investors seeking low-cost, passive investing options.

Money Market Funds: A short-term, high-quality debt security funder, offering low returns and low risk. This type of account may or may not be FDIC insured, depending on the financial institution.

          Best for: Conservative investors seeking liquidity and safety.

Commodities: Physical goods like gold, oil, or agricultural products. They offer potential returns through price changes but are highly volatile and affected by economic and geopolitical factors.

          Best for: Investors looking for diversification and inflation protection.

Options: Contracts giving the right, but not the obligation, to buy or sell an asset at a specific price before a certain date. Options are stocks, but the buyer pays a premium to “bet” on a future stock price. Buyers can profit by purchasing shares that have increased above their “bet” at the expiration date and reselling them, or lose their premium paid if the stock price is lower than expected. They offer high returns but are very risky due to leverage and market volatility.

          Best for: Experienced investors seeking higher-risk opportunities.

 Futures: Similar to options, these are contracts to buy or sell an asset at a future date for a specified price. They exist for various commodities and financial instruments. Futures carry high risks due to leverage and market volatility, as they are used for hedging or speculation of what a commodity or financial instrument will cost in the future.

          Best for: Investors comfortable with uncertainty and high risk.

Cryptocurrency: Digital or virtual currencies like Bitcoin, using cryptography for security. These offer high potential returns but are extremely volatile and risky due to regulatory uncertainty and market speculation.

          Best for: Risk-tolerant investors interested in emerging technologies.

Certificates of Deposit (CDs)²: Bank-issued savings certificates with fixed interest rates and maturity dates. They offer low returns but are low-risk due to FDIC insurance.

          Best for: Conservative investors seeking low-risk, predictable returns.

Annuities: Insurance products that provide regular income in exchange for an initial payment. typically after retirement. They offer stable returns but can be complex with high fees and surrender charges.

         Best for: Investors seeking a stable income stream in retirement.

 Real Estate²: Investing in property or land can provide rental income and capital appreciation. This can include any real estate from a plot to a house to an entire building. Real estate investments carry risks such as market fluctuations and property management challenges.

          Best for: Investors seeking long-term appreciation and rental income.

Real Estate Investment Trusts (REITs): Companies that own, operate, or finance income-producing real estate, offer dividends to buyers. They carry risks related to property market fluctuations but also diversification opportunities.

           Best for: Investors seeking real estate exposure with liquidity similar to stocks.

Treasury Securities: Government-issued debt securities considered very low risk, offering modest returns, including T-bills, notes, and bonds. They are sensitive to federal interest rate changes.

          Best for: Investors looking for safe, government-backed returns.

 Private Equity: Investment in private companies, often involving large sums of capital. Private equity investments offer high returns but with significant risk due to lack of liquidity and longer investment horizons.

          Best for: High-net-worth individuals seeking long-term, high-risk returns.

 Venture Capital: Investment in early-stage startups with high growth potential. It offers high returns but is risky due to the high failure rate of new businesses.

          Best for: Investors willing to take on significant risk for potentially high rewards.

Hedge Funds: Pooled investment funds employing diverse strategies to generate high returns. They are risky due to leverage and complex strategies.

          Best for: Accredited investors seeking aggressive growth.

Foreign Exchange (Forex): Trading currencies to profit from exchange rate changes in the global marketplace. It offers high returns but is highly volatile and risky.

          Best for: Investors comfortable with high volatility and risk.

Collectibles: Tangible items like art, antiques, or rare coins that can appreciate in value. They are liquid and risky due to market unpredictability.

          Best for: Investors with a passion for collecting and a long-term perspective.

Now that you have a better understanding of twenty different investments you can make, how can you determine the right investment strategy for your financial goals? First, clearly define your specific financial objectives, evaluate your risk tolerance and determine your time horizon to help choose where you allocate your assets and investments.

If this still feels overwhelming, an experienced financial advisor can be an excellent resource. They can even help you define your financial objectives, if you are not sure where to start. Learn more about our dedicated wealth management team¹, and call 859-233-4500 to speak with one of the experienced advisors at “The Best Bank in Town” today!

1 Bank of the Bluegrass & Trust Co. |  Wealth Management. Insurance products, investment products and securities are:  NOT FDIC Insured  |  NOT Guaranteed by the Bank  |  MAY Lose Value  |  NOT Insured by any Federal Government Agency

2 Bank of the Bluegrass. Member FDIC  |  Equal Housing Lender. Bank NMLS ID# 421548  |  MLO NMLS ID# 1878102. Offer of credit is subject to credit approval.

Glossary:

• Capital Appreciation: The increase in the value of an asset or investment over time, achieved when the asset is sold for more than its purchase price.
• Diverse / Diversified / Diversification: An investment strategy that involves spreading investments across various asset types to reduce risk and improve potential returns by minimizing exposure to any single asset.
• Dividends: Distributions of a company’s earnings to its shareholders, usually in the form of cash or additional shares, typically on a quarterly basis.
• Exchanges: Marketplaces where securities, commodities, derivatives, and other financial instruments are traded, facilitating fair and orderly trading and price distribution.
• Hedging: A risk management strategy used to offset potential losses in an investment by taking an opposite position in a related asset.
• Liquidity: the ease with which an asset can be converted into cash without affecting its market price. It also refers to a company’s ability to meet its short-term financial obligations
• Market Volatility: Rate and extent of price movements in a market or security, indicating the level of uncertainty or risk associated with changes in an asset’s value
• Returns: The profit or loss from an investment over a particular period, typically a percentage of the initial investment.
• Securities: Financial instruments that represent some form of financial value, such as stocks, bonds, or options, and are used to raise capital in public and private markets.