The pandemic showed that it pays to prepare for any eventuality. When the health crisis started, it set off a chain of events that led to a global recession not seen since World War II. While some people were able to prepare for the situation, many people were left without a job and no means of earning an income. They relied on stimulus checks to tide them over until they get a new job.
In this situation, it pays off to have a source of passive income. So, if your finances have stabilized, it would be a good time to think about investing for your future. Here are some potential good investments you can consider for the future.
Rental Housing
Low mortgage rates have encouraged people to buy homes even in the middle of the pandemic. While the rates have increased since the start of the year, they are still lower than 15 years ago. With this in mind, you may consider rental housing as an investment. This investment is ideal for people who are willing to manage their properties. One thing, though, is that you may find it challenging to find a good tenant since some tenants tend to default on their monthly payments due to their job situation.
You have the option of buying existing properties through financing or buying it outright if you have the funds. Then, you have to manage the property and deal with the tenants. It’s also advisable to have a network of professionals who can work on the maintenance and repair needs of the property.
Another option is to look for land where you can build a multi-unit residential building. In this situation, you can choose the design of the structure. If you don’t have land yet, you can look for any land that’s for sale.
You can also hire someone to manage the property for you, which can become a good source of passive income for the years to come.
Government Bond Funds
Government bond funds are similar to mutual funds but invest mainly in debt securities issued by the US government and US government agencies. Among the debt instruments these funds invest in are T-bonds, T-bills, and T-notes. They also invest in mortgage-back securities issued by Freddie Mac and Fannie Mac.
Due to this, it’s a good option for someone who is just starting to invest. It is also a good option for people who want a good cash flow. They are ideal for people who are looking for low-risk investments.
Despite these benefits, you should also note that the fund is like other types of mutual funds and is subject to risks, such as changes in the interest rates. When interest rates increase, the price of bonds goes down. On the other hand, when interest rates go down, the price of the bonds goes up.
High-Yield Savings Accounts
High-yield savings accounts are savings accounts that offer higher interest rates compared to a standard savings account. These accounts normally have lower overhead costs that allow them to give out higher interests, particularly with internet-only banks. Additionally, if you need cash, you can easily transfer funds from these accounts into your primary bank account.
The Federal Deposit Insurance Corporation (FDIC) insures these accounts, so you won’t have to worry about losing them. These are also safe investments, and you won’t risk earning less when it’s reinvested, even with inflation.
Since these are savings accounts, they are quite liquid, and you can withdraw or deposit more funds whenever you want. But some banks are legally allowed to limit these types of withdrawals from the account for a particular statement period.
Short-Term Bond Funds
Short-term bond funds are funds that focus on investing in bonds with a maximum maturity of five years. These types of bonds come from different entities, including corporations and government agencies. The short-term maturity of the bonds makes them safer from fluctuations in the interest rates compared to medium-term and long-term bonds. You can also reinvest the income dividends from these bonds. Additionally, you can buy or sell the find shares any time during a business day,
While these bonds do not enjoy insurance from the FDIC, they provide higher returns to investors compared to government bond funds. But the higher return also means the risk is higher. When companies that issued the bonds run into financial trouble, they may default on the bonds. To mitigate the risk, you can focus on investing in high-quality corporate bonds.
The pandemic highlighted the importance of having another source of income aside from your job. While there are many investment options, you should be discerning to avoid losing the majority of your money to bad investments.
