Investing is a science of sorts and it takes some effort to build a solid portfolio of income-generating assets. If you don’t have time to study prospectuses or pore over the stock pages, you’ll need to take a different route to build wealth. Fortunately, there are some investments that are geared toward people who want to maximize returns without getting too hands-on.
Check out our investment calculator.
1. Dividend Stocks
Dividend stocks offer a regular payout to investors. Dividends can be received in the form of cash payments or they can be invested to purchase additional shares of the stock. The amount of dividends you earn is based on how many shares you own and the amount of earnings the company reports over the year.
Investing in dividend stocks could be a good option for investors who want to put their portfolio on autopilot. The key is to choose companies that have a long history of paying out a steady stream of dividends to their investors. The easiest way to do that is to stick with established brands like Coca-Cola or AT&T.
2. Target-Date Funds
If you’re an investor, it’s a good idea to make saving for retirement one of your top priorities. An important part of building your nest egg is nailing your asset allocation.
The younger you are, the more risk you can afford to take on. So a portfolio that’s full of stocks would be appropriate. Someone who’s in their 40s or 50s, however, would want to have a more equal division of high-risk and conservative investments.
Check out our asset allocation calculator.
Target-date funds take the hassle out of having to periodically rebalance, a process which can be intimidating if you don’t know a lot about the market. With a target-date fund, your asset allocation changes as you get older to minimize your risk.
There is a potential downside to keep in mind, however, if you’re considering a target-date fund. While you’re spared the trouble of having to switch up your investments, these funds aren’t tailored to your personal risk level. The fund operates on its own timeline instead, which means you could potentially miss out on bigger returns.
A bond is effectively a loan that’s made to a corporation or another public agency. The entity that’s borrowing pays interest on the loan, which is then passed on to investors. When the loan reaches its maturity date, the investors can pull their initial investment out and reinvest it somewhere else.
Bonds make sense for lazy investors for a couple of reasons. First, they generate modest yearly returns based on the interest rate on the loan. When you’re investing in something more volatile, like stocks, there’s no guarantee that you’ll earn a certain amount of money.
The other advantage of investing in bonds is that managing them in your portfolio isn’t time-consuming. You buy the bond, wait for it to mature and collect the interest in the process. There are no trades to execute, so it’s a no-muss, no-fuss investment.
There is a trade-off for that convenience, however, that you don’t want to overlook. While bonds are a stable investment, they also tend to produce lower yields than stocks or mutual funds. If you’re investing in bonds, it’s best to be realistic about what you stand to gain.
Taking a passive approach to investing can pay off as long as you’re choosing the right places to park your money. The investments we’ve outlined offer a combination of convenience and decent returns, which can be ideal for investors who prefer a set-it-and-forget-it approach when it comes to their portfolios.
Photo credit: ©iStock.com/MaRussya, ©iStock.com/WhiteBaltzinger, ©iStock.com/margouillatphotos