Seasoned investors tend to look at the markets with a long-term view, using current volatility that might be short- or medium-term to buy into themes that will pay off over many years, writes Giovanny Moreano for Bankrate.
These trends are hard to identify but can result in significant gains.
Among the five trends currently most popular are some that show significant potential for growth this year and beyond.
The first is artificial intelligence, which many believe could become the century’s most influential industry. International Data Corporation analysts predict that worldwide revenues for the AI market could reach $900 billion by 2026, which equals the compound annual growth rate of 18.6 percent from 2022 to 2026. Exchange-traded funds are an easy and efficient way to invest in AI-related stocks.
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Next are rising interest rates. There are specific sectors of the economy that historically tend to perform well with rising rates. For example, financial institutions can make billions of dollars in interest income following even a small interest rate increase as they charge higher rates on loans.
The third popular trend is fixed-income investments, which are once again becoming desirable with the overall rise in interest rates in the past several years. While interest rates were close to zero, the majority of people got used to not earning anything from their savings and short-term investments. Now, however, those interest rates have increased, and high-yield savings accounts pay more than five percent, as do some CDs.
Inflation protection is also gaining in popularity. This includes Treasury Inflation-Protected Securities and Series I Bonds.
Finally, ESG investing has seen a boon from the disruption and uncertainty caused by the pandemic. Investors, consumers, and employees have all shown a renewed interest in corporations that prioritize environmental, social, and governance practices.
“I agreed with the trends in this article, and I would add one more: any investment that has a value-added component,” he said. “Examples would be real estate development projects, private equity funds, and anything that involved creating economic value outside of the stock market needing to move up to create value.”
Hubler also added a favorite asset class.
“Cash is now paying a decent interest rate, is risk-free, and provides the dry powder investors can benefit from as the economy slows down and opportunities arise,” he said.
Read more about the most popular investment trends at Bankrate.
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