7 Foolproof Investments You’ll Thank Yourself For Later | Smart Switch: Personal Finance

(Selena Marajin)

The Cambridge Dictionary defines “investment” as “the act of putting money, effort, time, etc. into something to gain a profit or advantage, or the money, effort, time, etc. used to do so”. This seems like a better definition than those that just refer to money, since there are certainly other types of investments. The time invested in your children can bear very good fruit, for example.

Here are seven types of investments that are likely to pay off very well for anyone who makes them. See which one(s) you want to start (or continue) doing.

Image source: Getty Images.

1. Health

Yes, your health. It is one of the most important things for each of us, and neglecting it, which is very easy to do when we are busy and stressed, can have terrible consequences. On the other hand, taking care of our health, such as eating nutritiously and exercising, can pay off.

Good health can lead to a longer life, and perhaps one less plagued by pain and other problems. That can mean a happier life. There’s also a financial angle: The healthier you are, the less you could end up spending on healthcare over the course of your life.

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2. Debt reduction

Next, put some money toward paying off any high-interest debt, like credit card debt, which often charges people 20% or even 25% or more annually. If you have, say, $30,000 in debt and you’re charged 20%, you’re missing out on about $6,000 in interest payments each year. Debt with lower interest rates, like mortgages or buying a car, isn’t as problematic.

3. Knowledge

Here’s another vital investment you can make in yourself: Spend plenty of time reading and learning. It also doesn’t have to be all about finances. However, within the financial world, consider reading articles and books about big investors and big companies. You can learn about profitable investment strategies from the former and how to spot promising investments from the latter.

4. Index Funds

When it comes to investing money, relatively few people will fare better than those who simply keep putting dollars into one or more low-cost broad-market index funds, like those that track the S&P 500. Do it and quickly have a stake in 500 of America’s largest companies and earn returns close to those of the broader stock market.

The stock market has averaged annual gains of about 10% for long periods. However, you can earn more or less than that, depending on your particular investment period. Here’s what you could achieve if you invest diligently over time and earn an average return of 8%:

Growing at 8% for

$10,000 invested annually

$15,000 invested annually

$20,000 invested annually

5 years

$63,359

$95,039

$126,718

10 years

$156,455

$234,683

$312,910

15 years

$293,243

$439,865

$586,486

20 years

$494,229

$741,344

$988,458

25 years

$789,544

$1,184,316

$1,579,088

30 years

$1,223,459

$1,835,189

$2,446,918

Data source: Author’s calculations.

5. Dividend Stocks

You can also add some dividend-paying stocks to your portfolio, as they can do well over time, and most will continue to pay you even when the economy tanks. Take a moment to appreciate what they do too: they’ll regularly have extra money deposited into your investment account. Do you have a portfolio worth, say, $300,000, with an overall dividend yield of, say, 3%? That means around $9,000 will show up in your account each year. Better yet, healthy and growing dividend payers will also increase their payouts over time, so that $9,000 can become $12,000 some years and $15,000 some years later.

Keep in mind that many index funds will also pay dividends, if the stock they own does. the SPDR S&P 500 ETF (NYSEMKT: SPY)for example, it recently yielded 1.4%.

6. Growth Stocks

To target a steeper rate of growth than the broader stock market offers, consider adding some growth stocks to your mix. They are owned by companies that are growing at higher than average rates, and many have the potential to generate large double-digit earnings for many years. (However, not all growth stocks will succeed, so consider following The Motley Fool’s investment philosophy, which suggests owning 25 or more stocks, with a goal of holding them for at least five years. That can give even overvalued stocks a reasonable opportunity to grow: – or fall and then recover.

7. Memories

Lastly, don’t spend everybody your time at work and trying to improve yourself. Take time to enjoy hobbies you love and spend time with loved ones. Creating memories with friends and family is also a great investment.

Be a well-rounded investor: Invest in yourself, your health, others, and the stock market. That can contribute to a rich and fulfilling life.

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Selena Maranjian has no role in any of the aforementioned actions. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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