Deciding on what to invest in can be quite a hassle. There are a lot of options out there, and that alone can be a headache.

However, if you are a millennial who has lived through the many ups and downs of the global economy, the conversation about investment might not be at the top of your mind, and that’s understandable.

Maybe it’s because you have other pressing concerns, like your student debt, or you think investments are very risky.

Here’s the thing though: investing can be a way out of your debts, and not investing is a more risky path to take because it guarantees that you won’t be able to retire.

So, let’s break down some of the best types of investments right now and explore some tips for you to start investing as a millennial.

Understanding Investments

Growing up during the dot-com boom and the 2008 financial crisis would have exposed you to the word “investing.” But what does it really mean?

Investing means allocating money or resources to an asset, project, or item with the hope of making a profit over time. This could look like buying stocks, investing in real estate, or even forex trading, where you trade currencies in order to turn a profit.

While investing might seem risky, it has been proven to be one of the most effective ways to grow wealth, create a passive income, and build a financial future that isn’t solely dependent on trading your time for money.

Investing is also a crucial path to long-term financial stability. Without it, most people wouldn’t be able to retire.

Thanks to compound interest that exists in investment products, your money grows exponentially over time when invested well, and at the same time, some investments also protect your money against inflation.

Key Considerations Before Investing

Before you start investing, you need to understand a few key features that make it a successful venture. Let’s explore each, including insights into the best types of investments.

Reach a Level of Financial Stability

Before diving into investments, tackle high-interest debts first. For lower-interest obligations like student loans or mortgages — often considered “good debt” — sticking to a regular repayment plan is sufficient.

Another smart move before investing is to establish a safety net, ideally 3–6 months’ worth of living expenses, to protect yourself against unexpected financial setbacks.

Know Your Financial Goals

Your financial goals dictate the type of investments you can make and for how long. For instance, you might choose to invest to achieve a short-term goal like saving for a vacation, which would be very different from investing for long-term goals like retirement.

Risk Tolerance

Knowing the level of risk you’re comfortable with is half the decision you need to make before you start making investments. Are you able to take on a high-risk investment, or would you rather stick to something more low-risk? It is also good practice to never invest more money than you are comfortable losing.

Knowledge and Research

If you haven’t already, take time to educate yourself about investing (reading this is a good start). Begin with the basics, like investment types, and market trends, and identify the best types of investments for your goals.

Then, you can start looking into reliable apps, brokers, and platforms that can help you along your investment journey.

Most importantly, you need to understand transaction fees, account management costs, and tax implications.

Emotional Discipline

The most important “pre-investing” criteria is learning to avoid making impulsive decisions based on market fluctuations. Stick to a strategy, and remember that investing isn’t going to work out if you don’t stick to your plans.

Investments For Millennials

Let’s take a quick look at some of the investment opportunities that you can get into as a millennial. The investment products on this list are not all the options available to you, but they have been known to bring impressive returns over the years and would be strong options for you to explore.

Please note that investing in more than one of these is the ideal approach, and there’s no need to rush into it. You can start small and diversify your investments with time; the key is starting as soon as you can (like now).

Stock Market

The stock market is a very broad term that refers to a marketplace that allows individuals and companies to buy and sell ownership stakes in companies. You can trade many investment instruments on the stock market, ranging from individual stocks to different funds like index funds and ETFs (Exchange-Traded funds).

When considering the best types of investments, stock market options like the S&P 500 are perfect for starting small and keeping it low-risk, as they have been known to deliver an annual return of about 10%. However, they can be unpredictable, so they’re better suited for longer-term investments.

Retirement Accounts

Don’t underestimate retirement accounts like 401(k)s or IRAs as investment options because they can be your ticket to financial freedom, especially if you start saving in them early enough.

Plus, they also come with some tax benefits and free money from employers who would match your contributions.

And the best part? Just $500 a month from age 25 can grow to over $1 million by retirement. These accounts are also low-risk and are really worth it.

Cryptocurrency

Crypto is arguably one of the best investments in the last decade, and you need to be taking advantage of it. One Bitcoin in November 2024 is worth over $70,000, up from $0.09 in 2010 (that’s close to a billion percent increase in less than 20 years).

That said, these are very high-risk investments as prices in the crypto market swing wildly, especially with the emergence of newer coins and murky regulations. This is, however, a worthy investment to have in your portfolio.

Bonds and Fixed-Income Investments

Bonds are a safe bet if you’re looking for something low-risk. Historically, government bonds have been known to offer steady annual returns of around 2–3%. They’re not the flashest, but they’re reliable and great for balancing out riskier investments like stocks or crypto in your portfolio. And should be part of your portfolio

There are other forms of investment that you might want to look into to diversify your portfolio, but these are a great way to start investing.

Best Types of Investments to Build Long-Term Wealth

Investing early is key to building long-term wealth, and no matter how confusing the investment landscape might seem, you need to understand that there’s no “one-size-fits-all.”

Investments are personal and should align with your individual goals and values. You can start small today and explore options that resonate with your interests and risk appetite.