Jul 24, 2025
Key Takeaways
- The investments pros say to consider depend on whether you’re looking for long-term growth, medium risk or low risk, as well as your risk tolerance and goals.
- According to the experts we spoke with, the most successful investment strategies typically prioritize diversification, long-term planning and a commitment to steady, proven assets over speculation.
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A critical component to investing is aligning your financial goals with your personal levels of risk tolerance, especially in an economy experiencing elevated concerns about inflation, interest rates and overall global economic uncertainty. Whether you’re aiming for long-term growth, seeking steady income or simply trying to protect your money, there are options to fit your needs.
In this guide, the MarketWatch Guides team looks into various types of investments that both new and experienced investors may want to consider in today’s complex economic environment. These investment types are organized according to long-term growth, medium-risk and low-risk strategies, and prioritized by their historic use for stability and growth. We didn’t include speculative or high-volatility investments, such as cryptocurrency.
Best Long-Term-Growth Investments, According to Pros
The investments below are designed to provide more growth over the long term, and they can be suitable for investors with long-term goals such as retirement, wealth building or saving for college, pros say. However, consult a licensed financial adviser or tax professional before making any investment decisions.
1. S&P 500 Index Funds
Index mutual funds can be excellent long-term investments because they’re passive and low cost, and many have predictably generated high returns over many decades.
“Research has repeatedly shown that active investing strategies cost more and yet do not deliver better results than passive investing strategies,” Lisa Whitley, accredited financial counselor and founder of MoneyByLisa, said. “An active investor (or active mutual fund) buys and sells stocks based on their belief that they can achieve a higher return than the stock market average return. A passive investor simply buys and holds all of the stocks that comprise a broad market index, such as the S&P 500.”
The S&P 500 tracks the 500 largest publicly traded companies in the U.S. S&P 500 index funds try to replicate the performance of the S&P 500 by holding stocks from the same companies on the index and rebalancing as needed if a company drops off or enters the list. While S&P 500 index funds don’t usually beat the market (because they’re essentially mirroring the performance of the market), they can be excellent long-term investments. The S&P 500 has returned an average of about 10.5% per year before inflation since it was introduced in 1957, though it’s important to note that some years the S&P 500 falls.
The best index funds (or exchange-traded funds, which are similar) often have low expense ratios, which represent the annual cost of owning the funds. Actively managed funds have expense ratios averaging 0.60%, while passively managed index funds are one-fifth as expensive, averaging 0.11%, according to Morningstar, and typically outperform their actively managed counterparts.
2. Small-Cap Funds
Small-cap funds are ETFs or mutual funds that typically contain stocks from companies that are smaller than the largest publicly traded companies. Businesses included in these funds generally have market values between $300 million and $2 billion. While small-cap funds offer the possibility of higher growth than large-cap funds such as the S&P 500, they can come with more risk and volatility.
“If one believes that the Fed will be cutting rates over the next year and a half — and the consensus of the market is that it will — small cap stocks are well positioned to flourish,” said Robert R. Johnson, a chartered financial analyst and professor of finance at Creighton University. “Falling interest rates have historically been a tailwind for equity investors.”
3. Individual Stocks
Individual stocks represent ownership in a company and offer the potential for long-term growth as the business expands and earns more over time. While individual stock prices can be volatile in the short term, over the long term, a properly-diversified stock portfolio can return higher yields than other securities such as bonds. Investing in a diversified selection of well-established or well-regarded companies, such as Apple (APPL), Coca-Cola (KO) and Lyft (LYFT), can offer long-term growth potential and a hedge against inflation.
“Over the long run, stocks can prove effective inflation hedges because their cash flows aren’t fixed; they can adjust to inflationary environments. Fixed income [such as bonds] might be more problematic, given their fixed coupon payments. Shorter-term debt could alleviate some of the concern, since the shorter maturities allow more frequent adjustments if interest rates rise in response to inflation. Gold has a good track record during inflationary periods, but as an asset class that is sensitive to sentiment, it can be quite volatile.”
Expert insight from Marta Norton
Best Medium-Risk Investments, According to Pros
If you want to earn steady returns while avoiding sometimes-extreme stock market fluctuations, these medium-risk investments may work better for you, pros say. Of course, be sure to consult a licensed financial adviser or tax professional before making any investment decisions.
4. Real Estate Investment Trusts
Real estate investment trusts are companies that own and operate income-producing real estate such as office buildings, hotels, resorts and self-storage facilities. REITs can be included in a diversified portfolio without investors having to buy and manage actual properties. They tend to pay out higher dividend yields than other stocks, so they can help you build a passive-income stream.
“REITs are a great way to gain diversified exposure to real estate,” said Asher Rogovy, chief investing officer at Magnifina, a registered investment adviser with the Securities and Exchange Commission. “Exchange traded REITs also have the benefit of liquidity, whereas individual real estate investments might last decades.”
Publicly traded REITs are on stock exchanges and are registered with the SEC. You can buy shares of a publicly traded REIT through your brokerage. There are also REITs that don’t trade on the stock market, but they typically have up-front fees and commissions.
5. Investment-Grade Bonds
Investment-grade bonds have higher credit ratings and therefore lower risks, so they may be a good fit for investors looking to preserve capital and receive steady income. They’re generally issued by governments, municipalities and well-regarded corporations.
“Of all the different issuers of bonds, I’ve found investment-grade corporate bonds to provide an excellent risk-adjusted return compared to [U.S. Treasurys],” Rogovy said.
Investment-grade bonds have minimum ratings of Baa3 from Moody’s, a credit-rating agency, or BBB- from S&P or Fitch, other credit-rating agencies. While these bonds may have lower yields than bonds with lower credit ratings, there’s less chance of default, meaning your returns should be more stable.
A bond issuer’s financial performance can change quickly, so a company’s rating could be downgraded while you’re still holding the bond. If you sell a bond before it matures, you may receive less for it if it has a downgraded rating. The company could also get a rating upgrade, meaning you’d receive more for your investment.
Examples of investment-grade bonds include San Francisco’s General Obligation bonds and those issued by the Federal National Mortgage Association, also known as Fannie Mae. You can also buy investment-grade bond funds, which are index funds or ETFs, such as the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) or the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD).
6. Target-Date Mutual Funds
Target-date mutual funds hold a mix of investment assets, such as stocks and bonds, to help you prepare for a future need, such as retirement. For example, Fidelity offers the Freedom 2055 Fund, which is designed for investors who plan to retire in or around the year 2055.
“Target date funds are often called, ‘all-in-one’s’ as they’re an entire portfolio in one investment,” said Matthew Hale, a certified financial planner and partner at Make the Memory Financial Planning. “You pick a year closest to retirement and the fund will gradually shift from stocks to bonds as you approach the year.”
While these target-date funds are packaged in low-cost mutual funds and ETFs, they are designed to provide the convenience of diversification and automatic rebalancing. “These are great investments for investors who are just starting out or want to DIY their retirement accounts with minimal effort,” Hale said.
Best Low-Risk Investments, According to Pros
If you’re new to investing or you’re a retiree looking to preserve your nest egg, you may want to consider low-risk investments.
“As one approaches retirement, it’s generally good to shift from high-risk high-return assets into lower risk assets like bonds,” Rogovy said.
While these investments won’t provide the biggest returns, they may be better choices for preserving your capital. Before making any investment decisions, it’s always a good idea to consult a licensed financial adviser or tax professional.
7. U.S. Treasury Inflation Protected Securities
Treasury Inflation Protected Securities are government bonds issued by the U.S. Treasury. They’re considered to have virtually no risk, so they have the highest ratings with credit-rating agencies. However, that low risk usually equals a lower return.
“TIPS are a good investment when you enter retirement — they’re the inflation-proof body armor that shields your must-pay bills — yet their mechanics can be tricky, so make sure you understand how they work before strapping them on,” Joshua Mangoubi, founder and chief investment officer at Considerate Capital Wealth Management, said. “Once your essentials are protected, the rest of your portfolio is free to pursue growth for dream adventures, charitable giving and the legacy you hope to leave.”
TIPS pay a guaranteed rate (at least 0.125%) that moves up or down with inflation. Interest payments are made once every six months until maturity, and you can purchase bonds that mature in five, 10 or 30 years. When the bond matures, you’ll get the inflation-adjusted principal or the original principal, whichever is greater.
You can buy TIPS directly from TreasuryDirect.gov or through your brokerage. There are also TIPS mutual funds and ETFs, which may be easier to buy and sell within your brokerage account. For example, there’s the iShares TIPS Bond ETF (TIP) or the Vanguard Short-Term Inflation-Protected Securities ETF (VTIP).
8. High-Yield Savings Accounts
While a high-yield savings account isn’t technically an investment, it can be a great place to park your cash for emergencies or shorter-term savings goals. It’s extremely low risk since your money is insured if your financial institution is a member of the Federal Deposit Insurance Corp. or the National Credit Union Administration, which protects your money for up to $250,000 per institution, per depositor and per account category type.
The best high-yield savings accounts can offer annual percentage yields of 4% or more. Many online banks offer APYs that are competitive with high-yield certificates of deposit without locking your cash up for a predetermined period of time.
“If you’re just getting started, I’d focus on building an emergency fund and keeping it in a high-yield savings account, contributing to a Roth [individual retirement account] (if eligible) and investing in growth-oriented, low-cost ETFs and taking advantage of an employer-sponsored 401(k) or setting up an individual 401(k) if self-employed.”
Expert insight from Mark Johnson, Ph.D.
9. High-Yield CDs
CDs, like high-yield savings accounts, aren’t designed for long-term wealth building, but they can be solid options if you want to preserve your nest egg and produce steady income.
“If you don’t need the money anytime soon, CDs could be a steady option,” said Taylor Kovar, CFP, founder of 11 Financial. “The rate’s usually set, and you’ll know what you’re getting back. Some folks use them when they want to set money aside without having to think about it.”
The best CD rates are currently between 3.5% and 4.5% APY. Although some can offer much higher yields, they can also come with various hurdles to access them. Also, setting up a CD ladder, which consists of CDs with different maturity dates, can allow you to have access to a portion of your capital regularly. For example, if you open 6-month, 1-year, 2-year and 3-year CDs, you could then reinvest or withdraw the money from each one as they mature, ensuring a regular income.
How To Choose the Right Investment for You
When choosing the right investment for you, consider these factors:
Assess Your Risk Tolerance
The first step is assessing your risk tolerance, which is the degree of uncertainty or financial loss you’re willing to accept in exchange for a potential higher return. For example, if you’re a higher-risk investor, you’re OK with your portfolio having ups and downs — possibly large ones. If you’re a medium- or low-risk investor, you may accept a lower return to reduce the chance of losing money in the market.
“Some common mistakes new investors make are jumping into stocks without research, investing money they need soon, or panicking and selling when the market dips. To avoid these, do your homework, only invest money you won’t need for a while and try not to react emotionally.”
Expert insight from Justin Haywood
Consider Financial Goals
Match your investments to your financial goals. If your goals are long term, such as saving for retirement or building wealth, you may need to take on a higher risk level to get higher returns.
“In order to achieve one’s retirement goals, including early retirement, it can actually be preferable to take higher risk,” said Asher Rogovy, CIO of Magnifina. “Higher returns only come from higher risk assets. Younger investors can benefit from holding higher returning assets for a longer time.”
Diversify Your Portfolio
Consider your portfolio’s diversity when you’re picking investments. If you invest in individual stocks, choose stocks from 20 to 30 companies so your money is less vulnerable to fluctuations in a single firm’s stock price.
“Diversification is important to avoid unpredictable risks associated with a single company, such as a major accounting or legal scandal,” Rogovy said. “These are rare, and just 25 different stocks or bonds can avoid such risks.”
If you’re looking for a balanced portfolio with more stable returns, you might consider adding other types of securities. You may also want to keep a portion of your portfolio in cash, especially if you’re close to retirement or may need to pull money out soon.
What To Expect From the Markets in 2025
As we move through 2025, several key economic indicators are shaping the investment landscape. Inflation has begun to moderate after the elevated levels seen in previous years, and while the Federal Reserve has kept its benchmark interest rate steady since December 2024, there could be potential for rate cuts later in the year, depending on employment data and inflation trends. Additionally, market volatility is expected to persist, Mark Johnson, Ph.D., an investments and portfolio management fellow at Wake Forest University, told MarketWatch Guides.
“Investors should prepare for a market with no shortage of headlines,” Johnson said. “With inflation cooling in some categories, but still above prepandemic levels in many categories, the Fed is likely to move cautiously on rate cuts.”
“That uncertainty, combined with stretched equity valuations and geopolitical headlines, means volatility is not going anywhere,” he said. “The S&P 500 finished higher by more than 20% in 2023 and 2024. Can it make it a third year in a row? Buckle up!”
Frequently Asked Questions About the Best Investments Types
Historically, the investments with the best returns are stocks, especially U.S. small-cap stocks, according to the Ibottson SBBI, which publishes returns data related to stocks, bonds, bills and inflation. Large-cap stocks, such as those in the S&P 500, also have consistently high yields, with average returns for that index around 10.5% annually before inflation, according to OfficialData.org. To get the best return in the stock market, it’s important to maintain a diversified portfolio of broad-based index funds (such as the S&P 500), trade infrequently and leave your money to grow for the long term.
It’s impossible to predict the future, so we can’t answer that definitively. But one option might be to invest $10,000 in mutual funds or ETFs with no or low expense ratios, especially if you’re able to invest your money for the long term (10 years or longer). That said, this is not without its risks.
“There are many low cost ETFs or mutual funds that track broad indices such as the S&P 500,” said Robert R. Johnson, CFA, professor of finance at Creighton University. “The Vanguard S&P 500 ETF, ticker symbol VOO, has a miniscule 0.03% expense ratio.”
To make $3,000 per month in retirement, you would need to invest $900,000 if you follow the 4% rule. The 4% rule states that you can pull 4% out of your portfolio for 30 years in most market scenarios. To get $3,000 per month, we multiplied $900,000 by 0.04, which equals $36,000. We then divided that by 12 to get $3,000.
“Historically, a retirement nest-egg has been able to safely earn more than 4%,” Rogovy said. “Using a 4% draw in a budget adds a measure of safety. Although this is a widely known rule, it’s not easy to achieve. To fund retirement this way from investments alone, it means accumulating 25 times annual expenses.”
While no one can predict the future, Matthew Hale, CFP and partner at Make the Memory Financial Planning, tells us that he likes ETFs. “We’re positioning our clients in mid and small cap index ETFs and International ETFs as the S&P 500 has had a historic run,” Hale said. “We anticipate these to return to their historical average, which they’ve been heavily under-performing in recent history.”
*Data accurate at time of publication
*The content provided in this article is for informational purposes only and should not be construed as financial, investment or tax advice. You should consult a licensed financial adviser or tax professional before making any investment decisions. All investments carry risks, including the possible loss of principal. Past performance is not indicative of future results.