As the nation grappled with the direct and indirect impacts of the COVID-19 pandemic in 2020 and 2021, the economy experienced some recovery as the stock market climbed, a new president was elected, and the international markets experienced a comeback. The year began in the middle of an economic recession, with many locally-owned businesses remaining closed or offering limited business hours. As the economy continues with its recovery, many are stepping into the tepid investment market.
Today’s consumers have many pathways to invest, but coming out of the pandemic and all of its impacts, investors looked at both risky and risk-averse ways to build wealth. For example, various bonds, more specifically government bonds, offered investors some measure of value. Considered one of the safest ways to invest, these bonds are investments in debt securities such as treasury bills, treasury notes, and mortgage-backed securities from government issuers such as Fannie Mae and Freddie Mac.
This investment tool is safe because the government backs the bonds. Because they are mutual funds, they are subject to rate fluctuations and inflation. Interest rates are proportional to the price of bonds, so when the rates rise, the price of bonds drops, and when the rates drop, the price of bonds rises.
While this type of investment works for risk-averse investors, the returns are small, with many gaining returns of 1.5 percent compared to an inflation rate of two percent. On treasury inflation-protected securities, investors get 2.3 percent on the average return for a 30-year bond, which is not very remarkable but is one of the safest ways to protect against inflation.
The real estate investment trust (REIT) is another investment tool that has done pretty well in 2021 is the real estate investment trust (REIT). The REIT has been long touted as one way to invest in real estate without dealing with the responsibility of managing a property.
This investment tool allows consumers to purchase shares in a real estate portfolio of several properties across the country. Consumers can invest in apartments, commercial, retail, hospitals, hotels, and commercial REITs.
REIT is an investment tool that provides individual investors with access to commercial real estate and multi-family complexes, typically out-of-reach for this group. Furthermore, real estate is often a good choice of investment during stock market downturns.
For investors who are not risk-averse, cryptocurrencies have been an investment tool that has become very popular in the last few years. If a particular cryptocurrency takes off, the gains can be very lucrative. For example, in 2020, Bitcoin began at below $10,000 a coin and increased to $30,000 at the beginning of 2021. While the returns are high, this investment tool is highly volatile, with some falling sharply in a short time. They run the risk of becoming completely zeroed out and outlawed.
Finally, high-yield online savings accounts were another investment vehicle that allowed consumers to earn more interest. This investment tool was not only a safe way to save money, but it also provided investors with easy access to their cash.