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How do you choose investments with the best returns?

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Quick Answer

To choose an investment with the best return, it is important to first decide on the time frame for its intended return, according to MarketWatch. This is because different time frames are suited to different types of investments.

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Full Answer

For those looking to invest for the long term, volatile and risky investments tend to produce the best returns over time, as the long-term frame mitigates their risk, according to MarketWatch. Risky assets such as small-cap or emerging market stocks yield better returns than bonds over the long term. Commodities, also volatile assets, produce good returns over time.

While risky, volatile assets produce the best returns for the long term, those with short-term goals and short time frames should not invest in these assets, as their returns are very uncertain in the short term, according to Forbes. Some options for low-risk investments that produce the best returns for the short term are certificates of deposit, treasury inflation-protected securities, money market funds, municipal bonds and U.S. Savings bonds. Additional options are annuities and cash-value life insurance.

For those having neither short-term constraints nor long-term goals, and who are willing to take a small amount of risk, investments such as dividend-paying stocks and mutual funds, preferred stock, and peer-to-peer lending are investments that yield the best returns for this purpose, notes Forbes.

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