If you've got some extra cash and you're ready to invest it, it's important to get the best return on your money that you can, whether it's a small amount or a big one. With that in mind, we asked three of our top contributors to discuss what they think are particularly compelling investments today. Their ideas included paying down expensive debt before you invest, an opportunistic investment in international companies, a short-term bet on gold prices and domestic uncertainty, and a fantastic opportunity to invest in an amazing growth company.
Here's a closer look at what they had to say.
Eliminate wealth-destroying debt first
Steve Symington: Though I write about investing in publicly traded stocks every day -- and continue to believe buying and holding high-quality stocks is the best way to predictably generate wealth over the long term -- I feel the need to mention a different place some investors might be better off putting their money: paying down high-interest debt.
In fact, as of this writing, I'm sure I'm not alone in carrying a balance of more than $500 on a credit card. So before I put any more money to work in the stock market, I want to make sure that balance is gone. Unless your credit card debt is paired with a low introductory or promotional rate, chances are the interest it's accruing is greater than the stock market's long-term average annual growth rate of just under 10%. With that in mind, one of the best places you can "invest" $500 is in reducing that debt.
Of course, it may be harder to quantify the "returns" you're generating on this investment as opposed to seeing the value of your equity holdings increase. But you can rest assured knowing this guarantees that debt can no longer hold back the performance of your other investments. In the process, you'll be paving your way a more financially secure future.
Europe or gold? Two ideas, depending on your objectives and experience
Todd Campbell: If you've got a little extra to invest, I think the iShares MSCI EAFE ETF (NYSEMKT:EFA) and the SPDR Gold shares ETF (NYSEMKT:GLD) may make sense right now. Which of the two you buy, however, depends on whether you're experienced or new to investing, and your time horizon.
New investors with a long-haul investment horizon might find that the MSCI EAFE ETF is the best bet. The ETF invests in large and mid-sized companies in developed countries outside the U.S. and Canada, such as Nestle and Toyota.
Foreign stocks have taken it on the chin over the past couple of years, and that may mean that this ETF is a bargain-bin buy. Because of slow growth in Europe, the MSCI EAFE has returned just 10% since 2012, which is a fraction of the 54% return for the S&P 500 ETF. As a result, the trailing-12-month price-to-earnings ratio for the MSCI EAFE is just 15. For comparison, the S&P 500's P/E is 18. Another added benefit of the MSCI EAFE ETF is that it yields 2.74%, which is nicely higher than the S&P 500's 2.1% yield.
However, if you already invest in stocks and your time-horizon is shorter, it may make sense to hedge some of your exposure with gold. The SPDR Gold ETF has returned more than 20% this year on worry that rising interest rates could slow U.S. growth and derail the U.S. dollar, but it's still down 26% since 2012; and that could suggest that there's more running room, especially since we've got uncertainty associated with this November's election.
A great opportunity to invest in huge growth potential
Jason Hall: Over the past several months, shares of Under Armour Inc. (NYSE:UAA) (NYSE:UA) are down nearly 30%. But at the same time, Under Armour the company may be in the best position it's ever been in.
Under Armour has grown sales at least 20% every quarter for the past six years but still won't break $4 billion in annual sales until this year. For context, industry giant Nike Inc. generated nearly $31 billion last year, making it nearly eight times bigger than Under Armour.
At the same time, Under Armour has only just started tapping its potential, with footwear accounting for only about one-quarter of sales versus over 60% for Nike, and revenue outside North America is only about 15% of Under Armour's. In other words, there's a lot of room to grow.
If you're investing for the long haul, buying 13 shares of Under Armour with your $500 could work out incredibly well, if you hold them for a decade or two.