It's a new year, and you may be holding some new money, perhaps from a work bonus or a holiday gift. If you're wondering where to invest money in 2015 and beyond, here are some solid suggestions.
Pay off debt
First off, invest that money in paying down high-interest-rate debt -- or, ideally, paying it off entirely. That may not sound like investing, but it is -- in reverse. Rather than buying stocks and other investments in order to build your net worth, you're paying off something that is rapidly eroding your net worth.
If you owe, say, $20,000 and are facing interest rates of 25% or more per year, then you're on the hook for $5,000 per year in interest alone. If you can't pay that, your debt load will grow, along with your interest obligations, creating a destructive spiral into deeper debt. Pay off that $20,000, though, and you'll be saving $5,000 annually in interest. It's hard to earn 25% in one year in stocks, but you can essentially earn that by paying off high-interest rate debt.
You have no business investing in assets like stocks and mutual funds until you're free of costly debt, so the sooner you pay it off, the better.
Invest in an emergency fund
We all need an emergency fund in case we are suddenly lose our job, face expensive medical bills, or confront some other financial disaster in life. Aim to have three to nine months' worth of expenses available to cover your rent or mortgage, taxes, insurance, food, utilities, transportation costs, and so on.
This kind of money is best kept in money market funds, savings accounts, short-term CDs, and other low-risk options. It would be nice to park a $20,000 emergency fund in stocks so that it could grow over time or generate significant dividend income, but the stock market is a risky place in the short term. It can drop at any time, and it can take years to recover.
Invest for retirement
Once you're debt-free and have an emergency fund, you should be thinking about how you will grow a hefty nest egg for retirement. The stock market is one of the best choices for that. You can invest in it easily and inexpensively via a low-cost broad-market index fund, such as the SPDR S&P 500 ETF (NYSEMKT:SPY), Vanguard Total Stock Market ETF (NYSEMKT:VTI), or Vanguard Total World Stock ETF (NYSEMKT:VT). Respectively, they invest you in 80% of the U.S. market, the entire U.S. market, or just about all of the world's stock market.
You can aim to top the returns of those funds with individual stocks, perhaps supplementing a core index-fund holding. If so, you might look for companies growing rapidly that also seem to be undervalued, because these will have the best prospects of capital appreciation. You could also seek companies with strong dividend growth records, because these companies tend to be stable and generous to shareholders.
Invest in yourself, too
Don't forget to invest in yourself as well, because that can pay off not only in personally fulfilling ways, but in financially beneficial ways, too. If you lose weight and get healthier, for example, you might reduce your overall healthcare expenses and may end up collecting annuity and Social Security payments for much longer, too. If you acquire new skills or further develop old ones, perhaps by going back to school or seeking a professional certification, you might be able to move up the career ladder more quickly or switch into a more lucrative or enjoyable profession. Earning more means you can fill your retirement accounts more quickly and perhaps even retire earlier.
Before you think about replacing your 50-inch TV with an expensive 60-inch one or trading in your 2010 car for a new model, spend a little time thinking about your best option for where to invest money in 2015.