It is essential for young professionals not to settle with their regular jobs, as it can limit their potential for financial growth. Making smart investments, such as in stocks, real estate, or a small business, can provide additional sources of income, potentially leading to greater wealth in the long term.
Additionally, investing allows for one’s money to grow over time and at a faster rate than through saving alone. It also helps diversify one’s portfolio, reducing the risks while increasing stability. However, it is critical to note that investing has negative aspects. Conducting thorough research or seeking advice from professionals before making decisions can mitigate certain risks.
5 Investment Trends this 2023
As an investor or someone planning to invest, you should know positive and negative investing trends to make well-informed investment decisions and better understand the economy.
#1. Passive investing
Passive investing involves buying and holding exchange-traded funds (ETFs) that track a broad market index. It has been a popular trend in recent years and is likely to continue this 2023. According to Bloomberg, about 54% or $6.2 trillion of total equity fund assets are from passive investing. Globally, ETFs rose to 8,552 in 2021.
This method is built on the idea that it is difficult to consistently beat the market through active stock picking or market timing. Hence, a more efficient strategy is to track its performance through a low-cost index fund.
Real estate is an excellent passive investment example as it provides a steady income stream through rentals.
#2. Alternative investments
Alternative investments, such as venture capital, art and antiques, derivatives contracts, and commodities, are becoming increasingly popular among investors as they seek to diversify their portfolios and generate high returns. It can also provide an offsetting position against inflation and market volatility.
Some examples of alternative investments that are likely to gain popularity this 2023 are the following:
- Infrastructure, such as renewable energy and transportation projects, offers a stable return while having a positive social impact.
- Impact investing funds companies and projects with positive environmental, social, or governance impact.
- Cryptocurrency, with the industry becoming mainstream and regulated, and blockchain technology now support different industries.
Nasdaq projected that alternative investments will reach $17.2 trillion by 2025.
#3. Meme stocks and retail
The trend of retail investors, particularly those on online forums and social media platforms, buying and promoting “meme stocks” has recently gained significant attention.
Hedge funds and other institutional capitalists heavily short some of these stocks. Meanwhile, retail investors have been buying them to drive up the price and cause losses for the short sellers.
Recently, retail investor activity made up 10% of the trading volume on the Russell 3000 index, a market-capitalization-weighted equity index tracking the 3,000 of the largest U.S.-traded stocks.
#4. Savings bonds
Savings bonds, also known as U.S. Treasury bonds, are a form of government-issued debt security and are considered a relatively safe and stable investment. Investors often use them as low-risk savings vehicles. They have also been traditionally popular among older investors and those looking for a safe place to park their money.
Recently, the popularity of Series 1 savings bonds rose, with an interest rate of 6.89% from November 1, 2022, to April this year. These bonds protect investors from inflation, as they can earn a fixed interest rate and a rate that changes with inflation.
The I bonds drive the interests of investors, as it is the perfect fit for a high-yielding yet lower-risk investment.
#5. Bear market
A bear market is a condition in which prices of securities, such as stocks, are falling, typically characterized by widespread pessimism and negative sentiment among investors.
This year, the bear market sticks around with insistent interest rate hikes, causing bonds to yield and fall along with stock prices.
Within the third quarter of 2022, the 60/40 allocation (60% stocks and 40% bonds), designed for moderate risk and moderate returns, suffered more significant losses than its stock-only counterpart. This report caused massive questions about whether this type of portfolio must go.
Keep Up to Date With Investing Trends
As young professionals, having or at least planning to have other income streams aside from your regular jobs, such as investing, is essential. With investing, you can earn a higher return on your money than you would through savings accounts. This method can grow your wealth over time, providing financial security and stability.
Keep up to date with the current positive and negative investing trends, and ensure that you educate yourself before diving into any economic opportunities. Being well-equipped to make well-informed decisions is vital, as it can save you from future losses. Check out the infographic below to learn more about investing trends to help you get started.
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