It can feel like a fruitless exercise to try to predict which one or two investments will generate the most profit in 2023.
After all, the economic environment will be very different depending on whether or not the Federal Reserve decides to stop rising interest rates, inflation declines, and the economy recovers significantly, as many forecasters think will happen.
As it is impossible to know how the following 12 months will unfold, it is prudent to evaluate a range of investment options that, taken together, can offer you income, security, and growth.
1. Fund of Diversified Growth Stocks
Growth stocks have been pummelling in the recent market. If you can ride out the short-term volatility, your investment in a diversified stock fund that has high-quality growth companies should eventually recover.
While another negative year for growth stocks is certainly likely, a recovery could occur as early as the second half of 2022 or the first quarter of 2023.
Instead of putting all your eggs in one basket with a single stock, it’s smart to diversify your holdings using a mutual fund or exchange-traded fund (ETF).
2. A Nasdaq-100 Exchange Traded Fund
The Nasdaq composite index lost 33% of its value during the bad market of 2022. The Nasdaq’s bigger loss in 2022 than the Dow Jones Industrial Average’s or the S&P 500 index can be attributed, in part, to the fact that the index is typically more volatile than the broader market given its heavy weighting of some of the greatest names in technology.
When the Nasdaq does recover, though, it usually does so with a vengeance. If you can stomach the market swings on the Nasdaq and are willing to take on the risk of owning an index that can drop 33% or more in a single year, then a Nasdaq-100 exchange-traded fund (ETF) may be a viable investment for you.
3. S&P 500 ETF
Every major market index, including the S&P 500, has successfully recovered from a bad market and set new records for price growth.
Although there is no guarantee of future results, this impressive track record indicates that investing in an S&P 500 ETF is a safe decision over the long run.
Although the market may not fully recover until 2023, it is always a good idea to invest when the index is down by roughly 20%.
4. Financial Investment With a High Rate of Return
If you’re a more cautious investor, now is as good a moment as any to put your money in a high-yield savings account.
The Federal Reserve’s aggressive rate hikes to curb inflation have led to a dramatic increase in the returns on high-yield savings accounts.
In 2020, the best high-yield savings account rates were around 0.50%, but today, you may find accounts yielding 3.80% or more.
In case you’re worried about further stock market sell-offs in 2023, you can take refuge in an insured savings account, which is currently offering a relatively high yield.
5. The Dividend Aristocrats Fund
High dividend-paying corporations have proven to be more resilient in times of economic turmoil. Companies with stable income streams are more attractive to investors during economic downturns because of their dividend payments.
Businesses that have maintained a dividend rise streak of at least 25 years are considered dividend aristocrats.
If you’re looking to diversify your portfolio, increase your income, and shield yourself from the more volatile parts of the stock market, a dividend aristocrats fund might be the best option for you.
6. Investment Trust in Real Estate
A REIT is a company that pools money from investors to buy real estate, which is then managed by experts and distributed to the company’s shareholders as income.
It’s a good method to gain access to the property without the hassle of managing it yourself or making a sizable initial investment.
There is some protection against another rough market year in 2023 because of the high dividends and lower volatility that these stocks normally offer.
7. Investment Properties
Investment property could be a good alternative to the stock and bond markets in 2023. Nonetheless, rents continue to rise despite the slowing housing market, and whenever interest rates and inflation begin to moderate, they may provide additional support for home values as well.
Because rental income tends to increase steadily over time, it can be a decent hedge against inflation and makes for a solid long-term investment. Over time, you could potentially win from long-term capital appreciation.
8. Asset Allocation for Value Stocks
In 2022, value equities were the way to go while growth stocks were out of favor. Time periods when value equities beat growth (or vice versa) tend to run in multiyear trends, thus this pattern may possibly persist through 2023.
Traders appear unwilling to overpay for firms with high valuations in 2023, which could make value stocks a safer bet.