5 Best Investments For Young Professionals

What are the 5 best investments for young professionals? What are the most efficient tools for maximizing savings? Retirement is far in the future for young professionals, but buying a house and taking on an increase in expenses isn't. It is important to search out the best investments today for tomorrow's nest egg.

1. Open an individual retirement account. An IRA is one of the best investments, not just for young professionals, but for anyone who has at least ten years before retirement. Interest grows slowly, safely and with minimal cuts from the tax man.
2. Look into municipal bonds. Bonds are great investments for young professionals because they carry a relatively small amount of risk with a solid return. Municipal bonds are debts issued by local governments. They are not as secure as Treasury bonds, but they are backed by small governments, which will repay the loan along with an agreed upon interest rate. For new investors, look for general obligation bonds.
3. Money market mutual funds. These are perfect investments for young professionals who have years to let low-yields accumulate and enough money for a sizable start. Money market mutual funds focus on low-risk securities, which don't make money quickly, but they do make money.
4. Young professionals should invest in time deposits. Also known as certificates of deposit or CDs, these investments are incredibly secure. Leave $5,000 in a CD for ten years rather than a savings account. It is an easy way to make money, which can be accessed in a set amount of time.
5. Buy stock to diversify an investment portfolio. While equities are very risky investments, they have the potential to bring high yields. With plenty of time and security of a good job, investing in stocks is not a bad idea for young professionals. Look for larger companies with steady growth. Wait for prices to dip and dive in.

Why are these the five best investments for young professionals? Because they offer security, long and short-term returns, risk, and most important of all—diversity.

References:

Levinson, Marc. (2003). "The Economist: Guide to Financial Markets." Third Edition. Bloomberg Press.

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