What you should know before choosing where to put money in 2024
There is no single answer to what you should invest in during 2024 — what makes sense depends on your age, how much risk you can handle, when you need the money back, and what you already own. The broad categories available to most people are stocks, bonds, real estate, and cash-like accounts. Each behaves differently when interest rates rise or fall, when the economy slows, or when inflation picks up.
The goal of this guide is to explain how each type works and what actually happens to your money, so you can think through which fits your situation. This is not advice about what you personally should do — that depends on details only you know. This is information about how these investments function, what their historical returns have been, and what risks come with each.
Key Takeaways
- Stock prices move based on company earnings and investor sentiment, and historically have returned around 10 percent per year over decades, but can lose 20 to 50 percent in a single year.
- Bonds pay a fixed interest rate and return your principal at maturity, making them more stable than stocks but offering lower returns, and their value drops when interest rates rise.
- Real estate produces rental income and can appreciate over time, but requires significant upfront capital, ongoing maintenance, and is less liquid than stocks or bonds.
- High-yield savings accounts and money market funds offer lower returns than stocks or bonds but protect your principal and let you access your money quickly.
- Most financial advisors suggest holding a mix of these categories based on your age and goals, rather than betting everything on one type.
How stocks work and what returns have looked like historically
When you buy a stock, you own a small piece of a company. The stock price moves based on whether investors think the company will make more or less money in the future. If a company reports strong earnings, the stock usually rises. If it misses expectations or faces competition, the stock falls. You can also receive dividends — payments the company makes to shareholders — though not all stocks pay them.
Over the past 100 years, the stock market as a whole has returned roughly 10 percent per year on average, but that average hides enormous year-to-year swings. In some years stocks rise 30 percent. In others they fall 20 to 50 percent. The 2008 financial crisis saw stocks drop nearly 60 percent from peak to bottom. The recovery took about five years. If you needed that money in 2009, you would have lost a lot. If you held on, you eventually made it back and then some. This is why financial advisors often say stocks are for money you will not need for at least five to ten years.
Individual stocks are riskier than the market as a whole because a single company can fail or disappoint. Most people who invest in stocks do so through mutual funds or exchange-traded funds (ETFs), which hold dozens or hundreds of stocks at once. This spreads the risk. A fund tracking the S&P 500, for example, owns pieces of 500 large U.S. companies, so one bad quarter at one company barely moves your return.
Bonds and how interest rates affect their value
A bond is a loan you make to a government or company. They promise to pay you a fixed interest rate — called the coupon — for a set period, then return your principal at maturity. If you buy a 10-year Treasury bond paying 4 percent, you get 4 percent per year for ten years, then your money back. That predictability is why bonds are considered safer than stocks.
The catch is that bond prices move in the opposite direction from interest rates. If you buy a bond paying 4 percent and interest rates rise to 5 percent, your bond is now worth less — because a new buyer could get 5 percent elsewhere. If you sell before maturity, you take a loss. If you hold to maturity, you get your full principal back regardless of what happened to the price in between. This matters because in 2024, interest rates are higher than they were in 2020 or 2021, which means bond prices have already fallen from their peaks. New bonds pay higher rates, which is attractive. Older bonds trading on the secondary market are cheaper, which can also be attractive if you plan to hold them.
Bonds issued by the U.S. government (Treasuries) are considered the safest because the government can print money to pay them back. Corporate bonds pay higher rates but carry the risk that the company could default. Municipal bonds, issued by cities and states, often come with tax advantages. The longer the bond's maturity, the more its price swings when interest rates change, so a 30-year bond is more volatile than a 2-year bond.
Real estate as an investment vehicle
Real estate can produce income through rent and can appreciate in value over time. If you buy a rental property for $300,000 and collect $2,000 per month in rent, you earn $24,000 per year — an 8 percent return on your cash down payment (though less after taxes, insurance, maintenance, and vacancy). If the property also rises in value, that is additional gain. The leverage is powerful: a 10 percent rise in a $300,000 property is $30,000 in profit, but you only put down perhaps $60,000 to $90,000, so your return on actual cash invested is much higher.
The downsides are significant. Real estate requires a large upfront investment, usually 15 to 25 percent down plus closing costs. You are responsible for repairs, property taxes, insurance, and finding tenants. If a tenant stops paying or damages the property, you have to evict them — a process that can take months and cost thousands. The property is illiquid, meaning you cannot quickly convert it to cash if you need money. Selling takes weeks or months and costs 5 to 10 percent in realtor fees and closing costs.
Real estate investment trusts (REITs) let you own pieces of real estate portfolios without managing properties yourself. They trade like stocks and are much more liquid. However, you do not get the leverage benefit or the tax deductions that direct property ownership offers.
Cash accounts and money market funds in a higher-rate environment
High-yield savings accounts and money market funds are the safest place to keep money you might need soon. In 2024, these accounts pay 4 to 5 percent per year — rates that were unthinkable a few years ago. Your principal is protected, and you can access your money within a day or two. The trade-off is that 4 to 5 percent is lower than the historical stock market return of 10 percent, and it is lower than what a new bond might pay.
These accounts make sense for money you need within the next one to three years, or for an emergency fund. They also make sense as a temporary holding place while you decide where to invest longer-term money. If you are uncertain about the direction of the economy or interest rates, holding some cash at 4 to 5 percent is not a bad outcome — it beats inflation and keeps your options open.
How to think about mixing different investment types
Most financial advisors suggest holding a mix of stocks, bonds, and cash based on your age and goals. A common rule of thumb is to hold a percentage in stocks equal to 110 minus your age. At 30, that would be 80 percent stocks and 20 percent bonds and cash. At 60, that would be 50 percent stocks and 50 percent bonds and cash. The logic is that younger people have time to recover from stock market downturns, while older people need more stability.
This is a starting point, not a rule. If you have a large inheritance and do not need the money for 30 years, you might hold more stocks. If you are retired and live off your investments, you might hold more bonds and cash. If you have a pension that covers your living expenses, you can afford to take more stock risk with your other savings. Rebalancing — selling some of what has done well and buying more of what has not — keeps your mix aligned with your plan. If stocks rise and now make up 90 percent of your portfolio instead of 80 percent, selling some stocks and buying bonds brings you back to your target. This forces you to sell high and buy low, which is the opposite of what most people do naturally.
What changes when inflation or interest rates shift
Inflation erodes the purchasing power of cash and bonds. If you hold $100,000 in a savings account earning 2 percent while inflation runs at 4 percent, you are losing 2 percent per year in real terms. Stocks and real estate can hedge inflation because companies can raise prices and real estate values tend to rise with inflation. Bonds are hurt by inflation because the fixed payments they make are worth less in real dollars.
Interest rate changes affect different investments differently. Rising rates hurt bond prices and can slow stock growth because companies have to pay more to borrow. Falling rates boost bond prices and often boost stocks because borrowing becomes cheaper. In 2024, interest rates are higher than they were in 2020 or 2021, which means bonds are paying more attractive rates than they did then, but also that future rate cuts could boost bond prices if they happen.
Frequently Asked Questions
Should I invest in individual stocks or funds?
Funds are simpler and less risky for most people. A fund holding 100 or 500 stocks means one bad pick does not sink your returns. Individual stocks require research and time. If you enjoy that and have the time, individual stocks can work. If you do not, a low-cost index fund tracking the S&P 500 or total market is a solid choice.
Is 2024 a good time to buy bonds?
Bond yields are higher in 2024 than they were in 2020 or 2021, so new bonds offer better returns. If interest rates fall, existing bond prices will rise, giving you a gain. If rates stay high or rise further, you earn the stated rate but do not get a price gain. For money you need in five to ten years, bonds at current rates are reasonable.
What if I do not have much money to invest?
You can start with as little as $100 or $500 in a low-cost index fund through most brokers. High-yield savings accounts have no minimums at many banks. Real estate requires more capital, but REITs let you own real estate exposure with small amounts. Starting small and adding regularly over time builds wealth through compounding.
How do taxes affect investment returns?
Stocks held over a year are taxed at lower rates than stocks held under a year. Bonds held in taxable accounts are taxed as ordinary income. Municipal bonds are often tax-free. Tax-advantaged accounts like 401(k)s and IRAs let you defer or avoid taxes on gains. Holding investments in these accounts first, before taxable accounts, can significantly improve your after-tax returns.
What should I do if the market drops 20 percent?
If you need the money soon, a 20 percent drop is painful and you may have to accept the loss. If you do not need it for years, a drop is an opportunity to buy more at lower prices. Most people who panic and sell during drops lock in losses and miss the recovery. Staying invested through downturns is how long-term wealth builds.