8 Best Long-term Investments for 2023

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The investment environment has had its ups and downs over the last few years, but one thing remains true: the best way to make money on your investments is to choose them carefully and hold them for the long term. So what is a “long term” investment? If you search investing sites online, you’ll see answers ranging from a minimum of one year — which earns you a break on capital gains tax when you sell your investment at a profit — to at least 10 years.

While it makes sense to pre-plan when you’ll sell some investments, such as funds with target dates and bonds with maturity dates, it’s also helpful to think in terms of the length of the time needed to maximize gains on your investments. The S&P 500 stock market index, for example, which is widely considered a barometer for the overall market, is down about 10% over the past year. However, it’s up more than 50% over five years and roughly 150% over 10 years.

The market will always go up and down, but over the long term, the trend is up.

Best Long-term Investments

Here are some of the best long-term investments you can make in 2023.

1. Growth Stocks

Growth stocks are those companies that are usually relatively young and have an industry-disrupting product or service. They typically re-invest the money they make back into the business, which drives the stock price up. In recent years, “growth stock” has become synonymous with “tech stock” but that’s not always the case.

Be aware that growth stocks tend to be more volatile than the general market, so they’ll go up and down. But if you hold them for the long haul, you’ll likely come out ahead.

2. Value Stocks

Value stocks are typically measured by their price-to-earnings or P/E ratio. This compares the price of the stock to the earnings per share, so it shows how much investors are paying for each dollar of earnings. A lower P/E ratio is better — it indicates the stock is “cheaper” than others in the same industry.

Value stocks are known for being “defensive,” which means they often do better than the overall market during downturns.

3. Dividend Stocks

Some stocks rely on the increasing price of their shares to deliver returns for their investors. Good performance drives the stock price up, making each share more valuable and each investor a little richer. But some stocks also pay investors along the way by distributing dividends. Each quarter or each year, every investor gets a check based on the number of shares they own multiplied by the amount of the dividend the company declares.

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These stocks also typically increase in value over time, so the investor is effectively getting paid twice — once when they get their dividend check and again when the share price goes up. If you’re a long-term investor, reinvesting those dividends into more shares of the stock compounds your gains.

4. ETFs

Exchange-traded funds, or ETFs, are similar to mutual funds in that they are a “basket” of stocks, of which investors buy shares. ETFs are traded like stocks, however, and are priced throughout the day rather than at the end of the trading day. They also typically reflect an index, like the S&P 500 or the Russell 2000. These index ETFs are not actively managed; rather, they are designed to mimic the performance of their index.

5. Stock Mutual Funds

Stock mutual funds are a popular way to diversify a portfolio. A mutual fund is comprised of various stocks, and investors buy shares of the fund, giving them a smaller investment in each of the companies represented in the fund.

You can buy mutual funds that focus on a specific index or on various sectors, like technology, healthcare or transportation, or that concentrate on specific types of companies, such as environmentally conscious companies or women-led and owned companies. Stock mutual funds are a little less risky than individual stocks because your investment isn’t wrapped up in one company.

What Are the Best Investments?

The best investments offer returns that you can hold for the long term. They can be a mix of safer choices such as real estate or a retirement plan like a Roth IRA, where you might not see immediate returns, mixed with investments that offer higher returns but could be subject to more volatility.

6. Target Date Funds

Target date funds are mutual funds that are managed with a specific exit date in mind. They are often used for retirement planning or college planning. You identify the target date fund by the year you will begin to withdraw the money, and the investments slowly become more conservative over time.

For example, if you plan to retire in 2055, you can invest your IRA money in a 2055 target date fund. The fund may invest in 60% stocks and 40% bonds right now, but by 2045, it will likely be in 30% stocks and 70% bonds, because bonds are less risky and you want to remove some risk as you approach retirement.

7. Real Estate

The old adage says, “they’re not making any more land.” Real estate is definitely a long-term proposition, whether you’re buying a house that you’ll live in and then sell when it’s time to retire, or you’re buying an investment property to rent out for passive income.

8. Savings Bonds

Savings bonds are not a very exciting investment, but that doesn’t mean there isn’t room for them in a long-term portfolio. Series I savings bonds have inflation protection that’s hard to find anywhere else. Bonds issued between Nov. 1, 2022, and April 30, 2023, have a current interest rate of 6.89%.

There are some things to be aware of, however, before trying to invest your entire net worth in savings bonds. First, they don’t mature for 30 years. This doesn’t mean you can’t cash them in before that, but you will get penalized. I bonds earn a combination of a fixed rate of interest and an inflation-adjusted rate, so the total interest rate will vary over the life of the bond, usually changing every six months. Finally, you can only buy $10,000 worth of I bonds each year.

Where Can You Invest $100,000 Long Term?

If you’re holding onto $100,000, consider using it to pay down debt first before getting on a savings plan. Pay off high-balance credit cards, for example. You might also want to start up an emergency fund. Finally, think about what the next five years looks like. How quickly do you think you’ll need to access the money? If you can hold onto it, consider opening a CD ladder or buying I bonds, or try investing in index or mutual funds if you’re ready to try out the market.

9. Bonus: Roth IRA

A Roth IRA is not an investment per se, but it’s a type of investment account. It’s an individual retirement account into which you put after-tax money. You can invest the money in almost anything you want, from cash to mutual funds to stocks and more.

When you withdraw it in retirement, you don’t pay any taxes on the withdrawals. You’ve already paid the taxes on the money you’ve invested, but the money you’ve earned all those years is tax-free when you take it out. The Roth IRA may be the best long-term investment vehicle there is, if a comfortable retirement is your goal.

Takeaway

Investing for the long term has been proven to be the most effective way to invest. Watching your money increase and decrease may be stressful, but if you know that you’re in it for the long haul, history says you’re likely to come out on top.

Daria Uhlig contributed to the reporting for this article.

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