A stock market is a collection of buyers, sellers, the stocks they are trading, the orders in which they are trading, and the prices at which they are buying and selling. What makes a stock valuable? A stock’s value is determined by the lifetime stream of cash flows it can pay to each investor in addition to all future startups funded with everything else in mind.
Millions of people are now searching for cheap stocks, low priced stocks or even bargain stock online. Many are trying to find good cheap stocks to buy if they are looking to invest in the stock market. When you are looking for cheap stocks to buy, there are many websites with free stock scans that will analyze the top 100 most liquid US stocks associated with 3,000 different data factors. With software, you can now talk directly with millionaires on which cheap stocks they’re buying right now.
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Short-term corporate bond funds
Corporate bond funds can be an excellent choice for investors looking for cash flow, such as retirees, or those who want to reduce their overall portfolio risk but still earn a return.
Corporations sometimes raise money by issuing bonds to investors, and these can be packaged into bond funds that own bonds issued by potentially hundreds of corporations. Short-term bonds have an average maturity of one to five years, which makes them less susceptible to interest rate fluctuations than intermediate- or long-term bonds.
Best investment for
Short-term corporate bond funds can be good for risk-averse investors who want a bit more yield than government bond funds.
Risk
As is the case with other bond funds, short-term corporate bond funds are not FDIC-insured. Investment-grade short-term bond funds often reward investors with higher returns than government and municipal bond funds.
But the greater rewards come with added risk. There is always the chance that companies will have their credit rating downgraded or run into financial trouble and default on the bonds. To reduce that risk, make sure your fund is made up of high-quality corporate bonds.
Liquidity
You can buy or sell your fund shares every business day. In addition, you can usually reinvest income dividends or make additional investments at any time. Just keep in mind that capital losses are a possibility.
Municipal bond funds
Municipal bond funds invest in a number of different municipal bonds, or munis, issued by state and local governments. Earned interest is generally free of federal income taxes and may also be exempt from state and local taxes, too, making them particularly attractive for investors in high-tax states or high tax brackets.
Best investment for
Municipal bonds are a good selection for investors who live in high-tax states, allowing them to avoid levies and generate income. Their lower yields may make them less attractive to investors in low tax brackets or low-tax states.
Risk
Individual bonds carry default risk, meaning the issuer becomes unable to make further income or principal payments. Cities and states don’t go bankrupt often, but it can happen, and historically muni bonds have been very safe — although a rough 2020 challenged that safety a bit.
Bonds may also be callable, meaning the issuer returns principal and retires the bond before the bond’s maturity date. This results in a loss of future interest payments to the investor. A bond fund allows you to spread out potential default and prepayment risks by owning a large number of bonds, thus cushioning the blow of negative surprises from a small part of the portfolio.
Liquidity
You can buy or sell your fund shares every business day. In addition, you can typically reinvest income dividends or make additional investments at any time.
Muni bonds may be bought individually, through a mutual fund or an exchange-traded fund. You can consult with a financial adviser to find the right investment type for you, but you may want to stick with those in your state or locality for additional tax advantages.
Municipal bond funds are great for beginning investors because they offer diversified exposure without the investor having to analyze individual bonds. They’re also good for investors looking for cash flow.
High-yield savings accounts
A high-yield online savings account pays you interest on your cash balance. And just like a savings account earning pennies at your brick-and-mortar bank, high-yield online savings accounts are accessible vehicles for your cash. With fewer overhead costs, you can typically earn much higher interest rates at online banks. Plus, you can typically access the money by quickly transferring it to your primary bank or maybe even via an ATM.
Risk
The banks that offer these accounts are FDIC-insured, so you don’t have to worry about losing your deposit. While high-yield savings accounts are considered safe investments, like CDs, you do run the risk of losing purchasing power over time due to inflation if rates are too low.
Liquidity
Savings accounts are about as liquid as your money gets. You can add or remove the funds at any time, though your bank may legally limit you to as few as six withdrawals per statement period, if it decides to do so.
A savings account is a good vehicle for those who need to access cash in the near future.
Best investment for
A high-yield savings account works well for risk-averse investors, and especially for those who need money in the short term and want to avoid the risk that they won’t get their money back.
Gaming and Leisure Properties
- Market value: $11.9 billion
- Billionaire investor: Gates Capital Management
- Percent of portfolio: 5.2%
Gates Capital Management is a fan of one of the Street’s favorite recovery stocks. The New York hedge fund with $3 billion in AUM once again upped its stake in Gaming and Leisure Properties (GLPI, $50.92), albeit at a slower pace than it did so in Q1.
The hedge fund added another 22,975 shares in the casino real estate investment trust (REIT) in Q2 – an increase to its position of less than 1%. That followed the purchase of 1 million shares, or a 35% bump to the position, in the first quarter of 2021.
Gates Capital now holds more than 3.9 million shares in GLPI – a holding worth $181.8 million as of June 30.
Analysts are big fans of GLPI thanks to both a snazzy dividend yield and attractive growth prospects as we ease our way out of the pandemic. The REIT’s properties – including the Belle of Baton Rouge in Louisiana and Argosy Casino Hotel & Spa in Missouri – are benefiting from a rush of gamblers returning to casinos.
The Street’s Strong Buy consensus recommendation makes it easy to understand why Gates Capital continues to increase exposure to a stock it first bought back in 2013. The hedge fund holds nearly 1.7% of GLPI’s shares outstanding, making it the REIT’s 10th largest investor.
Certificates of deposit
Certificates of deposit, or CDs, are issued by banks and generally offer a higher interest rate than savings accounts.
These federally-insured time deposits have specific maturity dates that can range from several weeks to several years. Because these are “time deposits,” you cannot withdraw the money for a specified period of time without penalty.
Best investment for
A CD works well for risk-averse investors, especially those who need money at a specific time and can tie up their cash in exchange for a bit more yield than they’d find on a savings account.
Risk
CDs are considered safe investments. But they do carry reinvestment risk — the risk that when interest rates fall, investors will earn less when they reinvest principal and interest in new CDs with lower rates, as we saw in 2020. The opposite risk is that rates will rise and investors won’t be able to take advantage because they’ve already locked their money into a CD.
Consider laddering CDs — investing money in CDs of varying terms — so that all your money isn’t tied up in one instrument for a long time. It’s important to note that inflation and taxes could significantly erode the purchasing power of your investment.
Liquidity
CDs aren’t as liquid as savings accounts or money market accounts because you tie up your money until the CD reaches maturity — often for months or years. It’s possible to get your money sooner, but you’ll often pay a penalty to do so.
With a CD, the financial institution pays you interest at regular intervals. Once it matures, you get your original principal back plus any accrued interest. It pays to shop around online for the best rates.
Because of their safety and higher payouts, CDs can be a good choice for retirees who don’t need immediate income and are able to lock up their money for a little bit. But there are many kinds of CDs to fit your needs, and so you can still take advantage of the higher rates on CDs.
Dividend stock funds
Even your stock market investments can become a little safer with stocks that pay dividends.
Dividends are portions of a company’s profit that can be paid out to shareholders, usually on a quarterly basis. With a dividend stock, not only can you gain on your investment through long-term market appreciation, you’ll also earn cash in the short term.
Best investment for
Dividend stock funds are a good selection for almost any kind of stock investor, but can be better for those who are looking for income. Those who need income and can stay invested for longer periods of time may find these attractive.
Risk
As with any stock investments, dividend stocks come with risk. They’re considered safer than growth stocks or other non-dividend stocks, but you should choose your portfolio carefully.
Make sure you invest in companies with a solid history of dividend increases rather than selecting those with the highest current yield. That could be a sign of upcoming trouble. However, even well-regarded companies can be hit by a crisis, so a good reputation is finally not a protection against the company slashing its dividend or eliminating it entirely.
Liquidity
You can buy and sell your fund on any day the market is open, and quarterly payouts are liquid. To see the highest performance on your dividend stock investment, a long-term investment is key. You should look to reinvest your dividends for the best possible returns.
Buying individual stocks, whether they pay dividends or not, is better-suited for intermediate and advanced investors. But you can buy a group of them in a stock fund and reduce your risk.
Nasdaq-100 index funds
An index fund based on the Nasdaq-100 is a great choice for investors who want to have exposure to some of the biggest and best tech companies without having to pick the winners and losers or having to analyze specific companies.
Best investment for
A Nasdaq-100 index fund is a good selection for stock investors looking for growth and willing to deal with significant volatility. Investors should be able to commit to hold it for at least three to five years.
Risk
Like any publicly traded stock, this collection of stocks can move down, too. While the Nasdaq-100 has some of the strongest tech companies, these companies also are usually some of the most highly valued. That high valuation means that they’re likely prone to falling quickly in a downturn, though they may rise again during an economic recovery.
Liquidity
Like other publicly traded index funds, a Nasdaq index fund is readily convertible to cash on any day the market is open.
The fund is based on the Nasdaq’s 100 largest companies, meaning they’re among the most successful and stable. Such companies include Apple and Facebook, each of which comprises a large portion of the total index. Microsoft is another prominent member company.
A Nasdaq-100 index fund offers you immediate diversification, so that your portfolio is not exposed to the failure of any single company. The best Nasdaq index funds charge a very low expense ratio, and they’re a cheap way to own all of the companies in the index.
Rental housing
Rental housing can be a great investment if you have the willingness to manage your own properties. And with mortgage rates hitting all-time lows recently, it could be a great time to finance the purchase of a new property, though the unstable economy may make it harder to actually run it, since tenants may be more likely to default due to unemployment.
Best investment for
Rental housing is a good investment for long-term investors who want to manage their own properties and generate regular cash flow.
Risk
As with any asset, you can overpay for housing, as investors in the mid-2000s found out. With low interest rates and a tight housing supply, housing prices ran up in 2020 and 2021, despite the economy’s struggles. Also, the lack of liquidity might be a problem if you ever needed to access cash quickly. You may have to come up with serious cash for some expenses, such as a new roof or air conditioning, if they’re needed. Of course, you’ll run the risk of the property sitting empty while you’re still paying the mortgage.
Liquidity
Housing is among the least liquid investments around, so if you need cash in a hurry, investing in rental properties may not be for you (though a cash-out refinance or home equity loan is possible). And if you sell, a broker may take as much as 6 percent off the top of the sales price as a commission.
To pursue this route, you’ll have to select the right property, finance it or buy it outright, maintain it and deal with tenants. You can do very well if you make smart purchases. However, you won’t enjoy the ease of buying and selling your assets in the stock market with a click or a tap on your internet-enabled device. Worse, you might have to endure the occasional 3 a.m. call about a broken pipe.
But if you hold your assets over time, gradually pay down debt and grow your rents, you’ll likely have a powerful cash flow when it comes time to retire.
Cryptocurrency
Cryptocurrency is a kind of digital electronic-only currency that is intended to act as a medium of exchange. It’s become popular in the last decade, with Bitcoin becoming the leading digital currency. Crypto has become a hot property in the last few years in particular, as dollars have flown into the asset, pushing up prices and drawing even more traders to the action.
Best investment for
Cryptocurrency is good for risk-seeking investors who wouldn’t mind if their investment goes to zero in exchange for the potential of much higher returns. It’s not a good choice for risk-averse investors or those who need any kind of safe investment.
Risk
Cryptocurrency has very significant risks, including ones that could turn any individual currency into a complete zero, such as being outlawed. Digital currencies are highly volatile and may fall (or rise) precipitously even over very short time frames, and the price depends entirely on what traders will pay. Traders also run some risk of being hacked, given some high-profile thefts in the past. And if you’re investing in cryptocurrencies, you’ll have to pick the winners that manage to stick around, when many could well disappear entirely.
Liquidity
Cryptocurrencies are generally liquid, especially the major ones such as Bitcoin and Ethereum, and you can buy and sell them at any time of day. However, the commissions on them tend to be very high (relative to typical investments such as stocks), and you’ll need to see significant appreciation simply to break even. So it’s important to find the best broker to minimize these costs.
Bitcoin is the most widely available cryptocurrency, and its price fluctuates a lot, attracting many traders. For example, from a price below $10,000 a coin at the start of 2020, Bitcoin soared to around $30,000 at the start of 2021. Then it doubled from there soon after, before falling back.
Unlike other assets listed here, it’s not backed by the FDIC or the money-generating power of either a government or company. Its worth is determined solely by what traders will pay for it.
Walmart
- Market value: $411.2 billion
- Billionaire investor: Ray Dalio (Bridgewater Associates)
- Percent of portfolio: 4.7%
Ordinarily, we look for stocks that account for at least 5% of a billionaire investor’s portfolio before including them on this list, but Bridgewater Associates’ interest in Walmart (WMT, $147.46) is sort of a special case.
Legendary investor Ray Dalio’s massive hedge fund – it has $223 billion in assets under management (AUM) – has 5.4% of its portfolio sitting in an S&P 500 index fund. Indeed, the SPDR S&P 500 ETF (SPY), with its 0.0945% expense ratio, is Bridgewater’s largest holding.
So it’s something of a feather in Walmart’s cap that the world’s largest retailer and Dow Jones Industrial Average component happens to be tops among Dalio’s actual stock picks.
Indeed, in the first quarter of 2021, Bridgewater upped its WMT stake by 45%, or 1.6 million shares. The fund’s total stake of 5.2 million shares, worth $736.5 million at the end of Q2, now accounts for 4.7% of its total equity portfolio value.
Note well that Dalio, whose net worth is estimated at $20 billion, according to Forbes, is a big fan of Dow stocks and ETFs. In addition to WMT at No. 2, Bridegwater’s top 10 holdings include stakes in Procter & Gamble (PG), Coca-Cola (KO), Johnson & Johnson (JNJ) and McDonald’s (MCD), as well as the aforementioned SPY ETF and the Vanguard FTSE Emerging Markets ETF (VWO).
Conclusion
Aside from Berkshire Hathaway, most of these stocks are not widely followed or highly anticipated. However, they are still great investments that will bring you significant returns down the road. These stocks represent just a small portion of my personal portfolio. I’m sharing them with you because they might very well become the next billion-dollar companies, which makes them incredibly lucrative potential investments.