How to invest your money
If you have some extra money to put to work, but don’t quite know what to invest in, there’s good news. The best investment ideas for 2017 include: Paying off your credit cards, buying real estate, high-quality dividend investments, and banking stocks. Here are the best ways to approach each of those.
1. Pay off your credit cards
I listed this one first for a reason, even though it technically isn’t an “investment.” Simply put, it doesn’t make sense to buy stocks or any other type of investment if you have high-interest credit card debt.
The reason is simple mathematics. If you have $5,000 in credit card debt at 18% interest, you’re paying $900 per year just for the privilege of owing that money. When investing, the best you can reasonably hope to earn on a consistent basis is 10-12% returns per year. Even at the top end of that range, you can reasonably expect a $5,000 investment to return $600 in its first year, at most. In other words, by investing instead of paying credit card debt, you’re setting yourself up to lose money.
2. Play a little defense
The current bull market is the second-longest in history, and while that doesn’t necessarily mean that stocks are going to fall, at some point, we’re going to see a correction or even a full-blown recession — it’s just a matter of when.
For this reason, I’m a fan of adding some defensive investments to your portfolio in 2017. And contrary to popular myths, being defensive doesn’t mean avoiding stocks. One example would be to buy an index fund that invests in dividend growth stocks, which tend to fare better during recessions. The SPDR S&P Dividend ETF (NYSEMKT:SDY), which tracks the S&P High-Yield Dividend Aristocrats Index, is one good option.
3. Banks could have some great years ahead
Financial stocks have been the biggest beneficiaries of the Trump rally, with the sector up nearly 18% since the election, and many banks performing even better, such as Bank of America