Top long-term investment strategies to use in 2024

The short version

• Investing for your future doesn’t have to be complicated, but it's essential for a comfortable retirement
• Consider opening a retirement account, which can give you substantial tax breaks and significantly add to your portfolio size
• Index investing is an excellent place to start; you can easily build a diverse portfolio with just a few funds
• Dividend investing can help you regularly generate cash flow and is popular with older investors
• Real estate investing is attractive but requires a significant capital outlay and ongoing maintenance

Discover how a simple decision today could lead to an extra $1.3 million in retirement

Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.

Discover the full story and see how you could be on the path to an extra $1.3 million in retirement.

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1. Open a retirement account

If you aren’t planning to withdraw from your investments before retirement, consider opening a registered retirement tax account. These accounts are like tax-sheltered baskets: They can hold a variety of financial instruments, from cash to stocks and bonds to certificates of deposit (CD) to mutual funds.

There are several types of retirement accounts to choose from, but they all have the potential to give you substantial tax breaks on investment gains. Some, like 401(k) plans, offer the tax break when you contribute by deferring taxes until withdrawal (presumably when you're in a lower tax bracket), while others allow investments to grow tax-free (like a Roth IRA). Furthermore, sometimes when you open a retirement account through your employer, you get the added benefit of employer matching — which is essentially free money.

However, the important thing to remember with these accounts is that if you withdraw the money before retirement, you could incur a stiff tax penalty. For this reason, registered retirement accounts are generally only suitable for long-term investments.

Read more >>> Roth IRA vs. Traditional IRA; Which Should You Choose?

2. Try passive investments (Like index funds or robo-advisor portfolios)

Active management may be necessary for short-term investments. But if you won’t need to liquidate your investments for 5 years or more, why not just dollar-cost average into a benchmark index each month and stop sweating the short-term ups and downs?

If you want to create a diversified portfolio covering multiple markets, then index investing is a great place to start. It removes the uncertainty of choosing which stocks to buy and when by buying a diverse mix of investments in a single mutual fund or exchange-traded fund (ETFs).

You can set up a portfolio of mutual funds or ETFs through a discount brokerage, or you can use a robo-advisor to choose your portfolio based on your unique risk tolerance.

Robo-advisor portfolios will automatically maintain an appropriate mix of stocks and bonds for different life stages. For example, if you’re young, it might set a higher ratio of stocks to bonds since your investment horizon is long and you have time for your investments to recover after a recession.

But for those with shorter time horizons, portfolios with a higher ratio of bonds to stocks may be more suitable because they're generally more resistant to market volatility. There are even “target date” funds which adjust the ratio of stocks to bonds as the maturity date approaches.

Read more >>> How to Determine Your Risk Tolerance

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3. Consider a dividend growth investing strategy

Dividend investing is another strategy that can provide passive growth over a long period. Dividends are a percentage of a company’s profits that are paid out to stockholders at regular intervals. Large, well-established companies usually offer them.

Companies that have consistently raised their dividends for the past 25 years are part of a group called the “Dividend Aristocrats.” There are dozens of companies on the dividend aristocrats list (there’s even an ETF), but here are some that you might recognize:

• 3M (MMM)
• Chevron Corp. (CVX)
• The Coca-Cola Co. (KO)
• Johnson & Johnson (JNJ)
• Walmart Inc. (WMT)

Dividend growth investing involves building a diversified portfolio of dividend stocks that will produce a regular income on top of typical growth. You can reinvest the dividend income if you don’t need it now. Investing in dividend stocks and reinvesting your dividends can be a great strategy if you have enough time for the power of compounding dividends to take full effect.

4. Invest in real estate

Due to the fees that are involved with selling a home, real estate usually isn’t an asset that you’ll want to invest in for just a year or two. Also, real estate crowdfunding sites often have minimum investment timeframes and may charge fees for early redemption of shares. However, for long-term investors, real estate can be a great asset to include in their portfolios.

Owning a rental property can provide you with a fully paid-for asset over time or even turn a small monthly profit. That said, the start-up costs are high. You’ll need a down payment and cash reserves if you can’t find a renter immediately. In addition, you'll need to find and manage renters, maintain the property, pay for repairs and cover your mortgage if your renter misses payments.

If you aren’t ready to take the plunge and buy a rental property, you can still invest in real estate. One option is to invest in a real estate investment trust (REIT). A REIT is a company that invests in commercial property, rental buildings, or other income-producing real estate. You can buy a share of a REIT, just like a stock. Some REITs are publicly traded, like the Vanguard Real Estate ETF (VNQ), but others are not.

Another option is to use real estate crowdfunding sites. (Think GoFundMe, but for real estate.) With these sites, you contribute to a real estate project and get paid back (with interest) at the end of a specified term.

Real estate crowdfunding sites are relatively new, and you might not be able to add them to your portfolio through an investment account. In addition, they often have strict redemption policies, so make sure to read the fine print before tying up cash in one of these investments.

The bottom line

Long-term investment strategies have consistently proven to be some of the best for building a secure financial future. No matter your experience level or risk tolerance, there's a long-term investment strategy for you. The two critical takeaways below can help lay the groundwork for success.

First, contribute regularly for most of your working life. Regular contributions will ensure you amass enough capital to compound your investments. The easiest way is to set up automatic contributions through your online banking.

Second, keep in mind that you’ll need to ride out market fluctuations when investing for the long term. Changing your risk allocation during a market downturn can be a surefire way to undercut your returns. So when the market takes a dip, remember that you chose your long-term investment strategy for a reason and stick with your plan.