5 Places to Set and Forget Your Money to Let It Grow

This post may contain affiliate links. I only recommend products I trust or personally use. Please read our disclaimer for more info.

In another article, I talked about how to divide up your investment portfolio among different asset classes to achieve good diversification. The point of this was to help you reduce your portfolio’s overall risk without ruining its growth potential.

If you haven’t read that article and you’re just starting to invest, then I suggest you check it out first. It’ll help you get an idea of how much money to put in each of these places.

Warning: I’m writing this article for the everyday person that wants to be able to invest his/her money wisely without having to spend hours looking at charts.

IF you are the type of person who’s excited about looking at charts for hours to decide which stocks to buy, then sit tight because I, Noah, am your Moses! (I’m really wishing I had a different name now. That biblical analogy just got kind of confusing…)

I love evaluating stocks (it’s probably the only thing that’ll ever love me back too), and I will write some articles about how to do this down the road. I just have to make sure you understand the basics of investing before we start getting all technical on you.

But for you folk who aren’t about that, don’t worry, you can achieve good returns on your money with very little effort if you’re smart about where you put your money! So, let’s get down to it then!

Top 5 Places to Set and Forget My Money

Just be aware that these are in order of how I want to explain them, and not by best to worst.

1. Mutual Fund

A mutual fund is A LOT like a Ponzi scheme. You give some guy your money, and he gives you back more money as if through magic. Huh…I guess they aren’t that similar. A key difference, for example, is that a mutual fund is legitimate and won’t steal your money.

If you’ve never heard of one before, or if you have and didn’t understand or don’t remember, then allow me to explain.

A mutual fund is an organization that allows investors to come together and mutually fund larger investments.

Typically, you’d open an account at a mutual fund, give them some money, and sit back and relax as you enjoy the fruits of someone else’s labor.

There are tons of mutual funds out there all investing in different things and at different costs.

If you want to take the mutual fund route, then you should take their cost into account. Depending on the fund, you’ll be charged a monthly or yearly fee that could be a flat rate or even a percentage of your gains. (Unfortunately, this doesn’t mean that they’ll pay you in the case of a loss. I hate it when they don’t play by the rules of math.)

In either case, you’ll want to search for a fund that has the lowest fees possible with this best performance possible. You’re welcome for that bit of common sense.

An easy to use, low-cost (sort of) mutual fund that I’ve used myself is Acorns. I mention Acorns a little more in depth in my article 3 Ways to Control Your Money and Build a Better Life. It’s a mutual fund that invests in different ETFs (which we’ll talk about next) for only $1 a month! And the “buy-in” cost is only $5, so even we broke college kids can get started!

Actually, they are offering you your first $5 dollars for free if you sign up using my link. So check it out.

Keep in mind, with Acorns (as with all mutual funds), your money is “out of your hands” so to speak. They make all of the decisions for you which is good if you lack the time, willpower, or commitment to take care of your money.

2. Exchange Traded Fund (ETF)

An ETF is pretty similar to a mutual fund which means it’s ALSO similar to a Ponzi scheme!! Totally kidding (again).

An ETF is basically a mutual fund that’s traded on the exchange like a stock. Instead of opening an account and investing money, you buy shares of the fund via your brokerage account.

Now there are lots of different ETFs that invest in various things from stocks to bonds to commodities (gold and silver), so you can really build your entire portfolio with only ETFs. This is basically what I do. My strategy of picking a good ETF boils down to finding one that is in my preferred sector and has a low expense ratio.

The expense ratio is the percentage of your gains that the fund keeps to pay for its expenses. I like to make sure that the expense ratio of any fund I invest in is under 0.5%, and there’s really no reason not to. There are plenty of good options out there, and expensive is never worth it!

Even though 0.5% and 2% may not seem like a big difference, over the course of several years, you could be looking at a difference of more than 30% growth in your investment based off your fund’s expenses alone. Investopedia actually has a great article explaining more about expense ratios and how they can affect the long-term growth of your money.

As long as you make sure to keep the expense ratio low, there’s nothing wrong with building your entire portfolio around ETFs. Like I said before, this is what I do to keep things simple. I prefer this over mutual funds since I can personally control which ETFs to invest in and reap the benefits of extremely low expense ratios. (Mutual funds tend to have much higher expense ratios in comparison.)

As far as stocks go, I suggest picking a low-cost index fund. These are great because they invest in every stock that is tracked by a specific index (like the S&P 500) which means that the stock portion of your portfolio is basically guaranteed to perform as well as the stock market as a whole. Since the stock market’s average growth over its lifetime is around 7% per year, these index funds will, over the long term, grow at a similar rate.

I mentioned before that there are ETFs for basically everything, but to invest in real estate, you’ll have to look elsewhere.

My favorite way to invest in ETF’s is to use M1 Finance.

They allow you to buy slices of different “pies” to make up your portfolio. I choose my different ETF’s using this app and divide up my percentages according to my portfolio strategy. (which you can check out here if you’d like.)

You can also click here if you’d like to check out M1 Finance, they really have a great platform. 

3. Real Estate Investment Trust (REIT)

In a nutshell, an REIT is an ETF for real estate.

Just like their stock counterparts, some REITs are traded on the exchange. But instead of pooling investors’ money to purchase different stocks, they use the money to purchase different properties such as apartment complexes, hotels, warehouses, office buildings, and more.

Notice that I said some REITs are traded on the exchange. There are non-traded REITs (like Fundrise) that you can invest in. The benefit here is that they are usually less volatile compared to publicly traded REITs since they aren’t affected by market fluctuations.

Unfortunately, this comes with the cost of less liquidity since you can’t just sell the shares. This means that you’ll have to be committed to keeping your money there for a while. If you’re serious about growing your money, then this shouldn’t really be an issue.

Personally, I’m a huge fan of Fundrise. It’s easy to start investing with them, but they do require a $500 minimum to open your account. However, once it’s open, they let you contribute amounts as small as $100 towards your account!

With Fundrise, you’re already going to achieve much better returns than a publicly traded REIT since your money doesn’t have to go towards what’s called “cost of auction.” This is basically the cost of being able to liquidate your money at any time and takes about 33% of your return according to the Fundrise website. Obviously, this means you’ll have to invest over a longer time span, but for 10-12% returns why wouldn’t you want to?

The real benefits set in once you’ve invested $1000 though. At this point, you’ve earned the right to have the top tier properties added to your portfolio further increasing your returns. You’re also able to select a core plan, so the people at Fundrise can tailor your portfolio holdings to suit your individual goals. You can choose from supplemental income, balanced investing, or long-term growth.

If you’d like to learn more, definitely check out the website, but if you’re feeling lazy, then I may write a more in-depth article later on.

Now that we’ve covered different equity options, let’s talk about some fixed-income securities.

4. Certificate of Deposit (CD)

A CD is something that you purchase at your local entertainment store for your own enjoyment, and if you’re lucky then it’ll become a classic that you can sell for a profit later. Wait…that’s the wrong CD.

A certificate of deposit is a deposit you make in a bank where you’re kept from withdrawing the funds until a set amount of time has passed (or the deposit has reached maturity in fancy talk). During this time, your deposit acquires interest, and typically the longer it takes your deposit to reach maturity, the better returns you’ll see on it.

Upon reaching maturity, the original amount (the principal) plus the interest is available for withdrawal. Some CDs will even auto-renew upon maturity, so you can leave your money in an endless cycle of growth. Many CDs require a decently large investment (many times $1000+), but there are some available for as low as $500.

Other than a CD, another option for a fixed-income security that is easy to set and forget is a bond.

5. Bonds (007)

A bond is kind of like a loan that you (the investor) make to a borrowing entity (like a corporation or the government). Like a CD, when you invest in a bond, you are putting your money away for a set amount of time in order to see some variable or fixed amount of interest.

Once the bond matures, you’ll be paid back the principal you invested along with whatever interest was agreed upon when you bought the bond.

There are 3 types of bonds:

• Corporate bonds – these are issued by companies

• Municipal bonds – these are issued by states and municipalities (just cities)

• Government bonds – these are issued by the U.S. Treasury and are usually called treasuries
  • Bills – are government bonds that last for less than a year
  • Notes – are government bonds that last for 1-10 years
  • Bonds – are government bonds that last for more than 10 years

Why are the government bonds named so wildly? Your guess is as good as mine. I’m going to phone it in here and allow you to insert your favorite joke about the government’s general ability to overcomplicate things.

There are also government bonds that are inflation protected. With these types of bonds called treasury inflation-protected securities (TIPS), your principal increases with inflation and decreases with deflation. This way, the overall value of the bond stays the same.

Also noteworthy with TIPS, your interest payments are made according to the adjusted value of your principal. So your interest payments likely won’t be the same amount each time and will rise and fall with your principal keeping your bond’s value steady despite inflation/deflation.

You can purchase bonds through your brokerage account that you use for trading stocks. You can also buy them through a bond broker, but many of them require a minimum initial deposit of $5000. Personally, I just buy shares of an ETF that invests in bonds. There is one called TIPS, for instance, that invests in…you guessed it…TIPS.

I like the ETF approach because it’s pretty low-maintenance but still gives you the benefit of having bonds in your portfolio. That’s basically the theme of this entire article after all.

Speaking of which, I hope this article has helped you to understand some of the different ways you can invest your money. If you combine this with our other finance articles to help you budget, save, and divide up your portfolio, then you should be well on your way to a financially stable life!

Thanks for reading and keep Living Better!

Until the next one, 

Noah