1. Home price appreciation*

One-year returns: 6.26% 
Three-year returns: 32.88%
Five-year returns: 48.95%

Homeownership is a core tenet of the American dream for a good reason.

Historically, prices have risen over the long term, catapulting scores of Americans into the middle class and providing wealth that can be passed down through generations. Plus, homeowners can live in—and enjoy—their investments. (You don’t get that from CDs.)

The challenge right now for many first-time buyers is to find a home they can afford. A shortage of homes for sale has kept prices high in many markets, and higher mortgage rates have pushed many would-be buyers out of the market.

And even those who can make the numbers work aren’t protected from downturns in the housing market. During the Great Recession, home prices plummeted, plunging many homeowners under water on their mortgages. Millions of Americans lost their homes to foreclosure.

But those who were able to hold on to their properties have seen prices rebound and then some over the past 15 or so years. And while many real estate professionals predict prices will dip in the months ahead, they’re not predicting any catastrophic drop. Many markets are still seeing prices increase, and most experts believe prices will recover nationally by next year or 2025.

“Homeownership is the greatest generator of wealth for most Americans,” says Bankrate’s Hamrick. “Over a long period, that should work well for most people and it generally does.”

2. Stock market*

One-year returns: -2.9%
Three-year returns: 40.9%
Five-year returns: 51.9%

Investing in the stock market isn’t for the faint of heart. After what seemed like meteoric growth during the COVID-19 pandemic, the S&P 500 has since had a few headline-making drops before recovering some of those losses. But while the market is risky—and plenty of folks have lost their shirts in it—it’s generally considered a good long-term investment.

The key is to play the long game and not focus on the day-to-day or week-to-week fluctuations, say financial planners.

Those who are nearing retirement and may need that money sooner might want to put less money in the stock market because of that volatility. They might want to invest more in bonds, mutual funds (which are collections of stocks), and certificates of deposits, which are considered to be safer investments.

“The market is going to go up and it’s going to go down. Over the long term, it’s going to be very important just to have had held on to those investments,” says Daniel Johnson, a financial planner at RE|Focus Financial Planning based in Winston-Salem, NC.

3. Bonds*

2023 average 10-year U.S. Treasury bond rate: 3.6%
2020 average 10-year U.S. Treasury bond rate: 0.89%
2018 average 10-year U.S. Treasury bond rate: 2.91%

Bonds have always been considered a safer, more stable, vanilla type of investment. But higher interest rates are changing that calculus.

“It’s very exciting right now,” says Vance Barse, a financial planner at Your Dedicated Fiduciary based in San Diego. “You can earn a much higher interest rate than you could [previously].”

Investors who opt for shorter-term bonds, with terms of a year or less, can find rates above 5%.

Bonds are loans made to companies and to federal, state, and local governments for a pre-determined length of time, typically ranging from a single month to 30 years. Investors earn interest on bonds and then receive their money back when the bonds mature.

While higher rates mean more profitability, the downside is that bonds purchased when rates were lower aren’t as attractive to invest in as the newer ones with higher interest rates. So if someone needs to sell a bond before it matures, they could lose money on that sale. And they might not get their full investment back if they don’t wait until the end of their term.

That’s how Silicon Valley Bank got itself in trouble and ultimately collapsed. The failed financial institution had bought up a lot of bonds that were worth less as interest rates increased.

This explains why the returns for bonds, which is what investors will make if they sell early, were down 1.51% over one year, down 9.26% over three years, and up 6.24% over five years as of April 25, according to Morningstar Direct.**

“But all of these losses are unrealized until someone decides to exit their exposure to the investment,” says Bankrate’s Hamrick. “These losses are essentially on paper.”

4. Bitcoin*

One-year returns: -27.4%
Three-year returns: 270.6% 
Five-year returns: 218.3% 

The spectacular rise of cryptocurrency has been well documented—as has its even more tremendous fall. The industry has been reeling since the large crypto exchange FTX collapsed late last year and its charismatic founder Sam Bankman-Fried was hit with 13 criminal counts, including securities fraud and money laundering. The repercussions have been felt throughout the digital currency landscape.

Investors who still want to put their money in bitcoin, the OG of digital currency, must accept the high amount of volatility. The market can plunge at any moment, which has happened, costing many investors their savings. There are no government insurance protections if something goes wrong. Investors who forget their credentials for their bitcoin wallet, where they can store the cryptocurrency, can lose everything. And transactions are irreversible.

“It’s not something I ever advocate investing in if you’re not willing to lose that investment,” says Johnson, with RE|Focus Financial Planning.

5. Home flipping*

Gross returns in 2022: 26.9%
Gross returns in 2019: 40%
Gross returns in 2017: 47.3%

Home flipping might seem glamorous—and lucrative—on HGTV. But the reality is that flipping a home takes a lot of money and work, and investors can wind up losing quite a bit in the process.

Investors made about $67,900 per flip last year, according to real estate data firm ATTOM. That was down from the previous year. And that figure doesn’t capture what flippers sunk into the home for maintenance and renovations. The gross return on investment numbers factored in only the difference between the initial price the home was purchased for and how much it sold for after it was renovated within a 12-month period.

Typically, flippers should expect that about 20% to 30% of their profits will be spent on renovations. And that’s if nothing goes terribly wrong during construction, such as an unexpected structural or plumbing issue, or home prices fall.
“The main risks are renovation budgets and schedules that fall short of reality, contractors who take longer than expected or do shoddy work, and potential delays in getting renovations approved by building inspectors,” says ATTOM CEO Rob Barber.

Investors also need to be cognizant of what’s going on in the market. Many flippers got themselves into financial trouble when they assume that home prices will keep rising indefinitely. During the Great Recession, many lost money when the market crashed and they couldn’t recoup what they had put into these homes.

“Home flipping is really great in the good times,” says RE|Focus Financial Planning’s Johnson. “But it can be really, really bad in the bad times because you’re stuck with a house that you can’t sell for what you’ve invested in it.

“It can come with a lot of risk if the housing market turns on you very quickly,” he adds.

6. Real estate investment trusts*

One-year returns: -19.78% 
Three-year returns: 34.22%
Five-year returns: 31.71%

For investors who would like to own a lot of real estate—but simply don’t have the funds to start buying up lots of property—real estate investment trusts might be something to consider. They allow regular Joes an affordable way to invest in commercial real estate, such as apartment buildings, warehouses, and other types of property, on the cheap.

Investors buy shares in REITs, which are companies that own real estate, and then receive quarterly dividend payments. They can also buy and sell their shares on an exchange, potentially for a profit.

“For the average person, you’re not going to have access to owning that business all by yourself,” says Meyer, with Real Life Planning. “Owning REITs gives you access … without having to have a billion dollars.”

However, REITs are risky. The rise in mortgage interest rates hammered just about every real estate category investors can purchase REITs in. Those concentrated in the office sector took a heavy beating last year as the rise of remote and hybrid work resulted in many companies breaking leases or cutting their office space. Returns in this sector fell 37.6% in 2022, according to the National Association of Real Estate Investment Trusts. Apartments, manufactured homes, and single-family rentals also saw steep declines.

The good news for investors: In the first three months of this year, returns on REITs focused on industrial, self-storage, and data storage real estate have been climbing.

The value of REITs is “going to go up and down with the economy,” says Meyer.

7. Money market funds*

One-year returns: 2.5%
Three-year returns: 2.57%
Five-year returns: 5.86%

Money market funds have recently been enjoying a rare moment in the spotlight thanks to higher interest rates. The average seven-day yield on these funds is now about 4%, according to Morningstar Direct.

These funds are popular with investors who value liquidity and stability over higher returns. The low-risk mutual funds typically invest in short-term U.S. Treasury and other less volatile bonds. While these funds are not completely risk-free, they’re considered to be pretty close. And investors can sell shares in them at any time.

“We’ve entered a new paradigm,” says Barse, with Your Dedicated Fiduciary. “Given where interest rates are, many of the banks are paying a fraction of what you can get in a money market fund … or an FDIC-insured CD.”

8. Certificates of deposit*

One-year yield: 1.68%
Three-year yield: 1.21%
Five-year yield: 1.23%

Certificates of deposit, better known as CDs, have become much more attractive to investors who don’t mind tying up their money for a few months to a few years. Most banks offer the investments, which require folks to fork over a set amount of money for a predetermined period of time at a fixed rate. Once the CD matures, the investor gets the money back plus interest.

Some financial institutions are offering rates above 5% for CDs with roughly one-year terms. So if you invest $1,000 in a 12-month CD, you’ll walk away with $50 once it matures. That’s not too shabby.

The downside is that if you need to take the money out early, you’ll pay a penalty for doing so.

“There are no guarantees that interest rates will stay where they are today,” says Johnson, with RE|Focus Financial Planning. With a CD, “you have a bank that’s guaranteeing you that rate for a period of time.”

9. Savings accounts*

Current average annual percentage yield: 0.24%
2020 average APY: 0.09%
2018 average APY: 0.09%

Many folks will probably find savings accounts a surprising addition to this list—especially with such low yields. That’s because many of the larger banks have kept rates low on most savings accounts.

However, savvy individuals who shop around can find accounts, many at online banks that are insured by the Federal Deposit Insurance Corp., offering rates 20 times as high, according to Bankrate’s Hamrick. He notes there were accounts offering roughly 4.8% yields last week.

The higher rates are a result of the Fed hiking interest rates.

“The world got flipped upside down with the most aggressive Federal Reserve in 40 years, resulting in the best savings account [yields] in a decade,” adds Hamrick.