In the era of meme stocks and cryptocurrency, it can be easy to become tempted to chase fast cash. But savvy investors know the real money is in long-term wealth. The best part is that there are plenty of tried-and-true methods that can take a relatively modest investment and help it grow to amazing size over time. We’re exploring four of the best, whether you’re just starting your career or looking to play catch-up for your retirement.
1. Index and Mutual Fund Investing
For many folks, the simplest way to grow long-term wealth is just regular contributions to investment accounts over time. But don’t toss all your money toward that hot stock or trendy company. The best way to invest for long-term wealth is by using index funds or other mutual funds. Mutual funds are simply investment vehicles that buy lots of different stocks, bonds, or other investments and allow individuals to buy a portion of the overall fund. This allows people to invest in a large, diverse group of businesses, even if they only have a modest amount of money to put in.
Index funds are a specific type of mutual fund that tracks a stock index like the S&P500. For example, an S&P500 index fund would own all 500 stocks in the index, allowing your investment returns to correlate closely to the index’s performance. Regardless of the type of mutual or index fund you choose, it’s vital to avoid high fees that will hold back your wealth gains over time. It’s also crucial to contribute regularly, which can be especially easy through automatic processes offered by your investment company or bank.
2. Real Estate
There are so many different ways to invest in real estate, but they all have one thing in common —a proven record of notable returns. Most people invest in real estate when they buy their home, even if it’s not their primary motivation. Over time, your mortgage payments will pay down the loan, eventually providing you with a valuable property you’ll own free and clear. In addition, your property will appreciate in value over time in many markets.
Other real estate investments beyond your home are also very popular. Some people buy rental properties and build long-term wealth through monthly cash flow, loan paydown, and long-term appreciation. Others flip homes, repairing poor condition or older homes and selling them for a profit.
Those without much capital can even get involved through wholesale real estate. Wholesalers often market directly to homeowners who haven’t even listed their properties for sale, looking for off-market deals. Once they identify these sellers, they connect them with other buyers who can quickly close the transaction. This solves the problem for everyone. Sellers get a quick sale without real estate commissions or open houses. Buyers find off-market deals at a discount. And wholesalers take a cut for connecting the two.
Wholesalers can also find great on-the-market deals that allow them to acquire deals without spending virtually any money on marketing such as direct mail and other costs. Real estate agents and brokers can support this for wholesalers by helping wholesalers find and monetize deals that are listed on the MLS. Whatever route you choose to take, wholesaling is one of the best ways to build capital for traditional real estate or other investments.
3. 401ks, IRAs, and Other Special Retirement Accounts
Many people with jobs that have 401ks or other retirement accounts may contribute a bit, but they may not be tapping into the full power of these incredible investment vehicles. For one, they offer tax advantages. These allow you to invest with current dollars and only pay taxes later in life when you withdraw. In the meantime, you’ll earn “bonus” returns on that extra, currently untaxed amount. In addition, many employers provide matching contributions up to a certain amount. This essentially doubles your retirement savings at no extra cost to you! It’s vital to contribute at least this much, or you’re leaving free money on the table. By setting up an automatic contribution from your paycheck, you’ll automatically build long-term wealth without even realizing it!
Even those who don’t have the benefit of an employer-backed 401k can open an IRA, which offers similar benefits. Roth IRAs are another alternative, allowing account holders to contribute post-tax dollars now and enjoy tax-free withdrawals when they retire.
4. Start a Side Hustle
When many think of side hustle, they may think of driving for a ridesharing company or something similar. While this is undoubtedly a popular one, side hustles can cover a wide range of fields and skills. And most importantly, they can provide a crucial extra income stream to improve your financial picture both short- and long-term.
If you have extra time, you can choose a more active side hustle, like ridesharing, starting a small business, or freelance work related to your primary field of expertise. More passive options could include selling art or a course online, dropshipping, or even a vending machine business! The money you earn can either go directly toward some of the investments discussed above, to an emergency savings account, or even just to cover regular costs and provide more financial breathing room.
Building Wealth for the Long-Term Is Easy with These 4 Methods
Building wealth is one of the most important things you can do to secure your future. As you can see, anyone can do it with these four straightforward methods. With a bit of discipline, you may be surprised how much your money can grow over time.