10 best long-term investments in 2025

2. Stock funds

Overview: A stock fund – either an ETF or a mutual fund – contains a collection of stocks, often unified by a specific theme or categorization, such as U.S. stocks or large stocks. The fund company charges a fee for this product, but it can be very low.

Who are they good for? If you’re not quite up for spending the time and effort analyzing individual stocks, then a stock fund can be a great option. A stock fund is an excellent choice for an investor who wants to be more aggressive by using stocks but doesn’t have the time or desire to make investing a full-time hobby.

Risks: A stock fund is less risky than buying individual positions — and less work, too. But a stock fund can still move quite a bit in any given year, perhaps losing as much as 30% or even gaining 30% in more extreme years.

If you buy a fund that’s not broadly diversified — for example, a fund based on one industry — be aware that your fund will be less diversified than one based on a broad index such as the S&P 500, a group of hundreds of America’s best stocks. For example, if you purchase a fund based on the chemicals industry, it may have a lot of exposure to oil prices. If oil prices rise, then it’s likely that many of the stocks in the fund could take a hit.

Rewards: A stock fund is going to be less work to own and follow than individual stocks. Because you own more companies — and not all of them are going to excel in any given year — your returns should be more stable. With a stock fund, you’ll also have plenty of potential upside. Here are some of the best index funds.

If you buy a broadly diversified fund — such as an S&P 500 index fund or a Nasdaq-100 index fund — you’re going to get many high-growth stocks as well as many others. But you’ll have a diversified and safer set of companies than if you own just a few individual stocks. By buying a stock fund, you’ll get the weighted average return of all the companies in the fund, so the fund will generally be less volatile than if you had held just a few stocks.

3. Bond funds

Overview: A bond fund — either a bond mutual fund or bond ETF — contains many bonds from a variety of issuers. Bond funds are typically categorized by the type of bond in the fund — the bond’s duration, its riskiness, the issuer (corporate, municipality or federal government) and other factors.

When a company or government issues a bond, it agrees to pay the bond’s owner a set amount of interest annually. At the end of the bond’s term, the issuer repays the principal amount of the bond, and the bond is redeemed.

Who are they good for? Bond funds are good for investors who want a diversified portfolio of bonds without having to analyze and buy individual bonds. They’re also good for individual investors who don’t have enough money to buy a single bond, which usually costs around $1,000. Bond ETFs can often be purchased for less than $100.

Risks: While bonds can fluctuate, a bond fund will remain relatively stable, though it may move in response to movements in the prevailing interest rate. Bonds are considered safe relative to stocks, but not all issuers are the same. Government issuers, especially the federal government, are considered quite safe, while the riskiness of corporate issuers can range from slightly risky to much riskier.

Rewards: A bond can be one of the safer investments, and bonds become even safer as part of a fund. Because a fund might own hundreds of bond types, across many different issuers, it diversifies its holdings and lessens the impact on the portfolio of any one bond defaulting.

The return on a bond or bond fund is typically much less than it would be on a stock fund, perhaps 4% to 5% annually (less for government bonds). It’s also much less risky.

4. Dividend stocks

Overview: Where growth stocks are the sports cars of the stock world, dividend stocks are sedans — they can achieve solid returns but they’re unlikely to speed higher as fast as growth stocks.

A dividend stock is simply one that pays a dividend — a regular cash payout. Many stocks offer a dividend, but dividends are more typically found among older, more mature companies that have less need for their cash.

Dividend stocks are popular among older investors because they produce regular income. Plus, the best stocks grow that dividend over time, so you can earn more than you would with the fixed payout of a bond. Real estate investment trusts (REITs) are one popular form of dividend stock (check out these five ways to invest in REITs).

Who are they good for? Dividend stocks are good for long-term buy-and-hold investors, especially those who want less volatility than average and who enjoy or need a cash payout.

Risks: While dividend stocks tend to be less volatile than growth stocks, they may still rise and fall significantly, especially if the stock market enters a rough period. However, a dividend-paying company is usually more mature and established than a growth company and so it’s generally considered safer. That said, if a dividend-paying company doesn’t earn enough to pay its dividend, it will cut the payout, and its stock may plummet as a result.

Rewards: The big appeal of a dividend stock is the payout, and some of the top dividend-paying companies pay 3% or 4% annually, sometimes more. But importantly they can raise their payouts 8% or 10% per year for long periods of time, so you’ll get a pay raise, typically each year. The best — called Dividend Aristocrats — have been paying and raising their dividends annually for more than 25 years straight. 

The returns here can be high, but won’t usually be as great as with growth stocks. And if you’d prefer to go with a dividend stock fund so that you can own a diversified set of stocks, you’ll find plenty available. Learn more about the best dividend ETFs and how to invest in them.

5. Value stocks

Overview: When the market runs up a lot, valuations on many stocks get stretched. When that happens, many investors turn to value stocks as a way to be more defensive and still potentially earn attractive returns.

Value stocks are those that are cheaper on certain valuation metrics such as price-earnings ratio — a measure of how much investors are paying for every dollar of earnings. Value stocks are contrasted against growth stocks, which tend to grow faster and where valuations are higher.

Who are they good for? Value stocks can be an attractive option because they tend to do well when interest rates are rising. Their lower valuation tends to make them less volatile and lowers their downside potential, too, making them a better option for risk-averse investors.

Risks: Value stocks often have less downside, so if the market falls, they tend to fall less. And if the market rises, they can still rise, too.

Rewards: Value stocks may be able to actually rise faster than other non-value stocks, if the market favors them again, pushing their valuations up. The appeal of value stocks is that you can get above-average returns while taking on less risk. Many value stocks also pay dividends.

6. Target-date funds

Overview: Target-date funds are a great option if you don’t want to manage a portfolio yourself. These funds gradually shift your investments from more aggressive stocks to more conservative bonds as your target date nears, so that your portfolio is safer as you approach retirement, when you’ll need to start withdrawing the money. But target-date funds vary in how quickly they move investors to bonds as the retirement date nears (called the glide path). Some target-date funds assume that investors will be retired for two decades or more and thus need exposure to stocks during retirement, so be sure to check your target-date fund's glide path to make sure it aligns with your investing goals.

Where to get them: Target-date funds are a popular choice in many workplace 401(k) plans, though you can buy them outside of those plans, too. You pick your retirement year and the fund does the rest.

Risks: Target-date funds will have many of the same risks as stock funds or bond funds, since they're just a combination of the two. If your target date is decades away, your fund will own a higher proportion of stocks, meaning it will be more volatile at first. As your target date nears, the fund will shift toward bonds, so it will fluctuate less but also earn less (though target-date funds vary in how much they shift to bonds by the time the retirement date arrives  — some stay heavily in stocks for a good chunk of retirement). Since a target-date fund gradually moves toward more bonds over time, it will typically start to underperform the stock market by a growing amount. You’re sacrificing return for safety. 

Keep in mind that, too, that target-date fund fees (called the expense ratio) can vary widely. If you're able to shop around (that is, you're not tied to your 401(k) investment menu), then be sure to look for low-cost options. For example, some fund companies offer target-date funds with expense ratios below 0.2%.

Rewards: Ultimately, what the fund is invested in drives your returns. More stocks should equal a higher long-term return, while more bonds should equal a lower long-term return. 

7. Real estate

Overview: Investing in real estate has long been considered one of the best long-term investments, in part because you can borrow the bank’s money for most of the investment and then pay it back over time. But it takes a good bit of money to get started and the returns often come from holding an asset for a long time — rarely over just a few years.

Who is this investment good for? For those who want to be their own boss, owning a property gives them that opportunity, and there are numerous tax laws that benefit property owners. That said, while real estate is often considered a passive investment, you may have to do quite a bit of active management if you’re renting out the property.

Risks: Any time you’re borrowing significant amounts of money, you’re putting extra pressure on an investment turning out well. Even if you buy real estate with all cash, you’ll have a lot of money tied up in one asset, and that lack of diversification can create problems if something happens to the asset. Also, even if you don’t have a tenant for the property, you’ll need to keep paying the mortgage and other maintenance costs out of your own pocket.

Rewards: While the risks can be high, the rewards can be high as well. If you’ve selected a good property and manage it well, you can earn many times your investment if you’re willing to hold the asset over time. And if you pay off the mortgage on a property, you can enjoy greater stability and cash flow, which makes rental property an attractive option for older investors.

8. Small-cap stocks

Overview: Investors tend to be interested in small-cap stocks — the stocks of relatively small companies — because they have the potential to grow quickly or capitalize on an emerging market over time. In fact, retail giant Amazon began as a small-cap stock, and made investors who held on to the stock very rich indeed. Small-cap stocks are often also high-growth stocks, but not always.

Who are they good for? Buying individual stocks requires a lot of work and analysis, but small-caps can be a great place to find the stocks that other investors have missed. But these small-fry companies tend to be much more volatile than larger established firms, so investors need to have an iron stomach. Also, if you’re going to buy individual companies, you must be able to analyze them, and that requires time and effort. So buying small companies is not for everyone. (You may also want to consider some of the best small-cap ETFs.)

Risks: Small-cap companies generally have more business risk than medium and large companies, because they have fewer financial resources, less access to capital markets and less power in their markets (less brand recognition, for example). Also, like growth stocks, investors will often pay a lot for the earnings of a small-cap stock, especially if it has the potential to grow or become a leading company someday. This high price tag means that small-cap stocks may fall quickly during a tough spot in the market.

Rewards: The reward for finding a successful small-cap stock is immense, and you could easily find 20% annual returns or more for decades if you’re able to buy a true hidden gem such as Amazon before anyone can see how successful it will eventually become.

9. Robo-advisor portfolio

Overview: With a robo-advisor you’ll simply deposit money into the account, and the robo-advisor automatically invests it based on your goals, time horizon and risk tolerance. You’ll fill out some questionnaires when you start so the robo-advisor understands what you need from the service, and then it manages the whole process. The robo-advisor will select funds, typically low-cost ETFs, and build you a portfolio.

Your cost for the service? A management fee charged by the robo-advisor, often around 0.25% annually, plus the cost of any funds in your account. 

Who are they good for? Robo-advisors are a great alternative if you don’t want to do much investing yourself and prefer to leave it to an experienced professional. At their best, a robo-advisor can build you a broadly diversified investment portfolio to meet your long-term needs. You can set the account to be as aggressive or conservative as you want it to be. If you want all stocks all the time, you can go that route. If you want the account to be primarily in cash or a basic savings account, then two of the leading robo-advisors — Wealthfront and Betterment — offer that option as well.

Risks: The risks of a robo-advisor depend largely on your investments. If you buy mainly stock funds because you have a high risk tolerance, you can expect more volatility than if you buy bonds or hold cash in a savings account. But with a savings account your risk is that inflation outpaces your returns. So, the risk is in what you own in your robo-advisor account. A robo-advisor will often build a diversified portfolio so that you have more stable annual returns but that comes at the cost of a somewhat lower overall return.

Rewards: The potential reward on a robo-advisor account also varies based on the investments and can range from very high if you own mostly stock funds to low if you hold safer assets such as cash in a high-yield savings account.

10. Roth IRA

Overview: A Roth IRA might be the single best retirement account around. It lets you grow your money tax-free for decades and then withdraw it tax-free. Plus, you can pass that money on to your heirs tax-free, making it an attractive alternative to the traditional IRA.

Who are they good for? A Roth IRA is a great vehicle for anyone with income from work to pile up tax-free assets for retirement. There are income limits that prevent high-income people from contributing to a Roth IRA, but the backdoor Roth IRA is a workaround for this issue.

Risks: A Roth IRA is not an investment, but rather a wrapper around your account that gives it special tax and legal advantages. If you have your account at a top brokerage, you can invest in almost anything that fits your needs. The risk is tied to what you invest in. So, if you have time on your side, then you can ride out the stock market's inevitable downswings. But if you’re risk-averse and want guaranteed income without a chance of loss, an IRA CD could be a good option for you. This investment is simply a CD inside an IRA. You have almost no risk at all of not receiving your payout and your principal when the CD matures. It’s about as safe an investment as exists, though you’ll still have to watch out for inflation.

Rewards: Your rewards over time will depend on what you invest in within your Roth. For example, you can invest in stocks and stock funds and enjoy their potentially much higher returns. Plus, a Roth IRA promises tax-free income in retirement — that can be a valuable tool for managing your finances once you're no longer earning money from work.

Essential rules for long-term investing

Long-term investing can be your path to a secure future. But it’s important to keep the following rules in mind along the way.

Understand the risks of your investments

In investing, to get a higher return, you generally have to take on more risk. That means very safe investments, such as CDs, tend to have low yields, while medium-risk assets such as bonds have somewhat higher yields and high-risk stocks have still-higher returns. Investors who want to generate a higher return will usually need to take on more risk.

While stocks as a whole have a strong record — the Standard & Poor’s 500 index has returned 10% over long periods — stocks are well-known for their volatility. It’s not unusual for a stock to gyrate 50% within a single year, either up or down. (Some of the best low-risk investments are much safer.)

Pick a strategy you can stick with

Can you withstand a higher level of risk to get a higher return? It’s key to know your risk tolerance and whether you’ll panic when your investments fall. Ideally, you want to avoid selling an investment when it’s down. Make sure you understand your investment strategy, which will give you a better chance of sticking with it when it falls out of favor. No investment approach works 100% of the time — that’s why it’s key to focus on the long term and stick to your plan.

Know your time horizon

One way you can actually lower your risk is by committing to holding your investments longer. The longer holding period gives you more time to ride out the ups and downs of the market.

While the S&P 500 index has a great track record, those returns came over time. Over any short period, the index could be down substantially. Investors who put money into the market should be able to keep it there for at least three to five years — the longer, the better. If you can’t do that, short-term investments such as a high-yield savings account may be a better option.

You can use time as an ally in your investing. And if you can commit to invest for the long term, you don’t have to spend all your time watching your investments and fretting about short-term moves. You can set up a long-term plan and then put it (mostly) on autopilot.

Make sure your investments are diversified

As mentioned above, no investing strategy works all of the time. That’s why it’s so important to be diversified as an investor.

Index funds are a great low-cost way to achieve diversification easily. They allow you to invest in a large number of companies that are grouped based on things like size or geography. By owning a few of these sorts of funds, you can build a diversified portfolio in no time.

It might seem exciting to put all of your money in a stock or two, but a diversified portfolio will come with less risk and should still earn solid returns over the long term.

Long-term investing FAQs

Bankrate’s Brian Baker contributed to an update of this story.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.