6 Best Investments For High-Income Young Professionals

​​High-income young professionals have important decisions to make regarding their money. How should they allocate it for the best chance of success? Here are six ideal investment options for them to consider.

Real Estate

Owning a home is one of the best investments anyone can make. Not only is a homeowner’s mortgage paid off over time, but their home will also likely increase in value.

Investing in rental properties is another excellent option. Doing so can provide you with extra monthly income, which you can use to pay any debt or save for the future.

Additional ways to invest in real estate include:

• Real estate investment trusts (REITs): Real estate investment trusts own, operate, or finance income-producing real estate. They offer a way to invest in large-scale, diversified portfolios of real estate assets.
• Mortgage-backed securities: Mortgage-backed securities are investments backed by home loans and real estate debt. Investors receive periodic payments of interest and principal, similar to a bond.
• Private equity: Private equity funds invest in real estate projects that are not publicly traded and include anything from office buildings and hotels to senior housing and storage units.

Stocks

Investing in stocks is another excellent way for young professionals to grow their money. Although this investment involves some risk, stocks can offer high returns.

Starting with a solid foundation is essential for those just beginning to invest in the stock market. Once you’re comfortable with the process, consider diversifying your portfolio by investing in a mix of growth, value, and international stocks.

Fast growth stocks are companies expected to grow faster than the overall market. They’re often newer companies with innovative products or services. Value stocks are companies that may be undervalued by the market and offer investors the potential for long-term capital appreciation. International stocks offer exposure to foreign economies, which can provide diversification and potentially higher returns.

Bonds

Bonds are another type of investment that can make an excellent addition to a portfolio. Although bonds don’t offer the same potential for growth as stocks, they’re generally less risky, making them an ideal investment for young professionals who want to offset some of the risks.

There are many bonds, including corporate, government, and high-yield. Each type has its risk and return profile, so it’s essential to research them before investing.

Mutual Funds

A mutual fund is an investment that pools money from many investors and invests it in a portfolio of stocks, bonds, or other assets. Mutual funds offer diversification and professional management and can be a good option for young professionals who want to invest but don’t have the time or knowledge to do so themselves.

There are many types of mutual funds, including index, actively managed, and target-date. Index funds are passively managed and track a specific market index. Professional money managers who buy and sell stocks run actively managed funds. Target-date funds automatically rebalance and adjust their asset allocation as the target date approaches.

Investing in a mutual fund is an excellent way to get started in the stock market if you don’t have the time or knowledge to invest on your own.

Cryptocurrencies

Cryptocurrency is a digital or virtual currency that uses cryptography for security. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.

Cryptocurrencies can be risky investments. However, they can also offer high returns, making them an appealing option for young professionals. If you’re considering investing in cryptocurrency, it’s crucial to research and understand the risks involved.

Certificates of Deposit (CDs)

A certificate of deposit, or a CD, pays a fixed interest rate over a set period. CDs are typically issued by banks and credit unions and are FDIC-insured, making them low-risk investments.

The downside of CDs is that they often have early withdrawal penalties, so it’s essential to choose a CD with a term that matches your investment timeframe.

Ready to Start Investing?

So, what is the best investment for high-income young professionals? The answer depends on many factors, including age, investment goals, and risk tolerance. Real estate may be a good option if you’re just starting out in your career and looking to invest for the long term. If you have a little more experience and want to try investing in stocks, remember to diversify your portfolio. And if you’re looking for a relatively safe investment with modest returns, consider buying bonds or mutual funds. Whatever route you decide to take, research and speak with a financial expert before making any decisions.