Practical guide to making the best investment right now
The time of the year has arrived when many investors evaluate various assets and decide what to invest in for 2024, aiming to make the best investment.
There are numerous alternatives to invest in, from stocks to bonds, ETFs to investment funds, safe-haven assets like gold to cryptocurrencies like Bitcoin and Ethereum, from commodities including energy to real estate investments, not forgetting the real economy. The choice of what to invest in for 2024 must take into account the extraordinary global situation we find ourselves in. In particular, consider:
- The still high inflation in the USA, Europe, and most industrialized countries
- The sky-high interest rates of central banks
- The Chinese crisis characterized by growth rates never so low, large companies unable to pay their issued bonds, and financial emergencies forcing the state to intervene
- The geopolitical context with an ongoing conflict following Russia’s invasion of Ukraine and the new front opened after Hamas’ attacks against Israel, which risks spreading to neighbouring countries
- The elections in the USA and for the European Parliament that can influence the policies of Central Banks (more those of the FED, compared to those of the ECB)
- Unemployment at its lowest in many countries (USA and European states) and at its highest among young people in China
- The prospects involving Latin America and the related fluctuations in various exchanges with the dollar
As it is evident, these are numerous variables that can interact with each other unexpectedly – contradicting, nullifying, or amplifying each other – and, in any case, generate uncertainty in the choice of what to invest in for 2024.
What aspects to always pay attention to when choosing what to invest in
Beyond the contingent factors to consider in the choice of what to invest in for 2024, the best investment must respect certain characteristics, independent of the economic-political context.
Steady growth
When choosing what to invest in, the prospect of steady growth should be considered. The investor should focus on opportunities that offer the promise of as stable a return as possible over time, avoiding the fluctuations and uncertainties that characterize some markets.
Long-term profitability
An investment must necessarily generate long-term profitability, ensuring a steady flow of income and/or capital gains in the medium to long term. This financial stability is essential for the sustainability of the investment and, in the long run, is more important than the % profitability.
Short-term profitability as well
Only some investment classes offer short-term profitability, and not all investors consider this when evaluating where to invest. However, this underestimates the stabilizing power that immediate income offers, which can also compensate for significant fluctuations in asset values.
Portfolio diversification
Diversifying one’s investments is a key practice in risk management. By spreading capital across multiple assets, investors reduce exposure to potential losses in any single area.
Legal and ownership stability
When deciding where to invest, legal and ownership stability are fundamental elements to avoid sudden losses. Investing in assets solidly anchored by clear property rights and in countries where property is protected by law helps to safeguard one’s interests.
Potential for capital growth
In addition to current profitability, when choosing where to invest, opportunities that present potential for capital growth should be sought. This growth can translate into an increase in asset value over time and generate significant capital gains.
Ability to beat inflation
Finally, when choosing where to invest, we must consider that, beyond the nominal return, this return in the short, medium, and long term must exceed inflation. It is crucial, in fact, that the investment maintains or exceeds the inflation rate to preserve the investor’s purchasing power.
What to invest in 2024: a matter of features more than circumstances
The complex current scenario, analysed at the beginning, makes it impossible to predict what will happen in 2024. In choosing what to invest in 2024, it is advisable to focus much more on the characteristics of various investments.
Stocks
Stocks can always lose much of their value and force the investor to endure difficult volatility. Volatility not balanced by short-term profitability, as dividend flows are often negligible and sometimes non-existent. Moreover, those who want to invest in this asset should do cherry picking to try to guess which stocks will explode in 2024, and this requires time, energy, and skills far beyond those of the average investor.
Bonds
Bonds can also lose part of their value during the next year, as they already did in 2023. It should be noted that this loss is potentially less than what stocks can suffer. Potential loss partly mitigated by coupon flows. At the same time, bonds have fewer long-term appreciation possibilities. Those who choose to invest in these assets also put themselves in the hands of central banks, as every decision they make has direct consequences on the bond market.
ETFs and Investment Funds
ETFs and investment funds offer the same advantages and disadvantages of stocks and/or bonds, with the additional disadvantage of funds having high management costs that are paid despite the practically null (in the long term) probability of “beating the market.”
Safe-Haven Assets
Gold and other safe-haven assets have reached record values and encountered resistances that will hardly be broken in 2024, unless in a scenario of a general crisis, which is really undesirable. Moreover, it should be noted that these assets are generally non-yielding, do not offer returns, and do not reward the investor in the medium to long term.
Cryptocurrencies
Cryptocurrencies like Bitcoin offer investors enticing possibilities for gain and high probabilities of losses both in the short and long term. While it is true that in 2023 Bitcoin went from $20,000 to $30,000, it is also true that we are less than half compared to the 2021 highs ($64,000). Highs followed by various falls and a series of rises, of ever lesser extent. All this without forgetting the absence of an underlying asset, so we cannot exclude the possibility that the value could be zeroed overnight.
Commodities
Commodities – the main and original culprits of inflation in Europe – after the post-pandemic rally, have largely and with different dynamics started to retrace. Given the winds of crisis, they are unlikely to appreciate over the course of 2024. Moreover, these assets, being very tied to industrial production, in fact offer no differentiation from the stock markets and the real economy. Those who hold commodities risk seeing amplified and unbalanced the negative effects of a recession.
Real Economy
The real economy, after running due to the demand exploded in the post-pandemic phase, throughout 2023 has slowed down and entered into recession in some important countries like Germany. It will probably continue like this in 2024, especially due to the combination of high inflation – which erodes company margins and impoverishes the population – and high rates – which make investments difficult. In addition, the cost of labor – due to unemployment at its lowest and the search for a different work-life balance by employees – has significantly increased and for many companies represents the main cost item. The chances of growth along 2024 at the moment do not seem to exceed the chances of losses and, even if the outcome were positive, it is unlikely that the return on investments in the real economy will be able to beat inflation.
The particular situation of the real estate market
In real estate, we are witnessing an unprecedented dichotomy, due to the combined effect of changes in working conditions and high rates on one hand, and high profitability on the other. The most troubled sector appears to be commercial real estate, which has to deal with the collapse of demand from companies. More and more companies – after the pandemic test – choose to focus on smart working and remote working, even with hybrid formulas, work modalities appreciated and requested by employees, often, already during the interview. Another sector in crisis is that of buying a first home, due to mortgages pushed to the sky by high rates from Central Banks. Meanwhile, the second home market remains almost stable, whose actors often do not need to resort to financing for the purchase and consider vacation properties as safe-haven assets with which to protect their wealth.
High-yield real estate investments
Those who purchase properties in the United States to rent them to working families meet practically all the criteria seen for choosing what to invest in 2024 (and not only in 2024):
- Constant growth, long-term profitability, short-term profitability, potential for capital growth – thanks to the combination of long-term revaluation and rental income.
- Portfolio diversification – for those who also own other assets such as stocks, bonds, funds, or ETFs.
- Legal and ownership stability – as a system like the US one favors the interests of owners even over those of tenants.
- Ability to beat inflation – as today the returns between 5% and 11% of this segment beat inflation, which fell below 4% in the USA.
Make the Best Investment in 2024
If you want to become a high-yield real estate investor, write to contact@opisas.com to learn about the opportunities offered by the best asset of the moment.
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