Keeping cash on hand is a losing proposition in today's market. Because of the 8.6% year-over-year rise in inflation recorded in June, every dollar you have in your pocket will be worth less and less as time goes on. Rather than burying your money under your mattress, which would cause it to lose value over time, you should consider investing it. Investors may discover several excellent assets, whether stocks, bonds, or alternative investments, on sale at discount rates due to the recent significant declines in the markets.
A bear market is one of the finest periods to build a long-term investment portfolio, particularly for younger investors in the accumulation portion of their investing careers. Buying one of these assets may be an excellent strategy to protect oneself against the negative effects of inflation while still providing a reasonable return on one's investment. Here are some ways of how to invest $5000.
Series I savings bonds
Series I savings bonds are fixed-income securities issued by the United States government. The interest rate paid on these bonds is determined by a combination of two rates: one is set, and the other depends on the inflation rate. I bond investors a tasty return in times of strong inflation, such as the present. Take, for example: At the moment, the interest rate that will be applied on I bonds that will be issued between May 2022 and October 2022 would be a stunning 9.62%.
These bonds are basically "risk free," since the complete faith and credit of the United States federal government guarantees them. I bonds may be held by investors for up to 30 years, after which they can be cashed. However, if you cash in an I bond before the five-year maturity period, you will forfeit the interest payments for the most recent three months. One disadvantage of I bonds is that you may only purchase $10,000 online via TreasuryDirect per fiscal year.
Berkshire Hathaway Inc.
Berkshire Hathaway, the flagship firm of Warren Buffett, is a superb core portfolio investment for investors of all experience levels, even those who are just starting. Because of its significant investments in blue-chip U.S. equities, the business may be considered a fund at this point in time. Berkshire Hathaway's year-to-date performance through July 7 is only down 6.6% compared to the S&''P 500's loss of 18.1%; this is a tribute to the company's resilience and Buffett's value investment philosophy.
Berkshire shareholders have historically experienced market-beating performance over extended periods, particularly when Buffett puts Berkshire's cash reserves to work during purchasing sprees, which has been the case usually. An investment in Berkshire provides access to a portfolio of companies personally selected by Warren Buffett. This allows investors to profit from Buffett's long-term value investing theory.
Vanguard S&''P 500 ETF
Buffett has recommended VOO as the investment of choice for his estate once he passes away, and there is solid justification for this recommendation. In the long term, it is notoriously difficult for professional investors and managers of hedge funds to outperform the index that it follows, the S&''P 500. The S&''P 500 is often regarded as a barometer for the overall performance of the United States stock market. Before being included in the index, each of the approximately 500 firms that make up its components must pass a screening conducted by the S&''P committee.
These companies range in size from big to midcap. The S&''P 500 index has produced a compound annual growth rate of 10% before accounting for inflation during several rolling 20-year periods. VOO allows investors to get passive exposure to the S&''P 500 at a cost that is accessible, with an expense ratio of just 0.03%. The S&''P 500 is an excellent long-term investment. Every year, this amounts to $3 on a portfolio worth $10,000.
Vanguard Total World Stock ETF
Although VOO is a fantastic choice for the long term, the ETF only follows approximately 500 large-cap U.S. stocks. By purchasing VT, which mirrors the performance of the FTSE Global All Cap Index, long-term passive investors may be able to diversify their assets across worldwide markets. VT's holdings include more than 9,500 major, mid, and small-cap companies from every industry, and they span markets in the United States as well as worldwide developed and developing economies.
Even though VT could be risky as an all-equity holding, it is one of the most secure and diversified equity ETFs available. Investors who purchase and hold VT may be certain they will always get the average return generated by the global stock market. Because of VT, there is no need to toss and turn at night fretting about which nation, market-cap size, or industry would exceed the others. The expenditure ratio for VT is 0.07%, which is somewhat higher than the expense ratio for VOO (0.06%).
