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When you’re investing in the stock market, you have seemingly endless options to choose from. All of those choices can sometimes feel overwhelming, and it can be tough to determine which investments are right for you.
While everyone will have different preferences and investing styles, there are some investments that can make a fantastic addition to anyone’s portfolio. If you’re ready to send your savings to the moon, these options could be a wise choice.
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1. Growth stocks
Growth stocks are investments that have the potential for above-average growth. Many tech stocks fall into this category, including companies like Amazon, Shopify, and Square.
Although growth stocks can be higher risk than their more established counterparts, there’s also more room for reward. These stocks are often from innovative companies that are disrupting their industries, which could make them lucrative investments. However, these organizations can also be more volatile than slower-growing businesses.
If you choose to invest in growth stocks, be sure to look beyond the stock’s earnings and focus more on the big picture. Stocks that have experienced explosive growth aren’t always good long-term investments, so look at factors like the company’s financials and its leadership team to gauge whether this stock will continue growing over time.
2. Dividend stocks
Dividend stocks are unique in that they can provide a source of passive income in addition to the returns you earn on your investment.
Some companies will reward shareholders by paying back a portion of their profits each quarter or year, called a dividend. While each dividend payment is small, over time, they can add up substantially and create a source of passive income.
You may also have the option to reinvest your dividends to buy more shares of that particular company’s stock. By consistently reinvesting your dividends, you can increase the number of shares you own without actually paying anything out of pocket. And the more shares you own, the more you’ll collect in dividend payments.
3. S&P 500 ETFs
If you prefer an investment that requires little to no upkeep, S&P 500 ETFs are a fantastic option. These funds track the S&P 500 index, which means they include the same stocks as the index itself and aim to mirror its long-term performance.
With an S&P 500 ETF, you don’t need to choose stocks or research individual companies. All you need to do is invest regularly and hold your investments for as long as possible, and your portfolio will gradually grow over time.
The downside to this type of investment is that it’s impossible to beat the market. By definition, S&P 500 ETFs earn average returns. They follow the market, so they can’t outperform the market. However, for many investors, average returns are a worthwhile trade-off when you consider that these funds require very little effort to achieve consistent growth over the long run.
4. Fractional shares
Fractional shares are perfect for the investor who wants to buy individual stocks without breaking the bank.
When you buy fractional shares, you’re investing in a portion of a single full share of stock. Some stocks cost hundreds or thousands of dollars for a full share, but with fractional shares, you can spend as little as $1 for a small slice of the same stock.
It’s still important to do your research when buying fractional shares. It can be tempting to buy risky stocks when it’ll only cost you a dollar to invest, but the same general investing principles still apply, regardless of how much you’re spending. If you’re not willing to hold a stock for at least a few years, it’s probably not a stock you should be buying right now.
Investing in the stock market is one of the best ways to increase your net worth and generate wealth over time. With these four types of investments, you’ll be well on your way to building an unstoppable portfolio.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Katie Brockman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Shopify, and Square. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.
