The new year is an opportunity to freshen up your investment strategy. How you invested in 2021 may need an update with new and popular trends emerging. Rising inflation is playing a large role in how investors, especially the wealthy, are designing their investment plans this year.
According to J.P. Morgan, “the key issues driving markets in the coming year will be shifting policymaker priorities, healthy businesses, and consumers, and continued innovation.” Before deciding to continue with your implemented strategy, continue reading for tips on how the wealthy are framing their investment plans this year.
Investing in cryptocurrencies
Before cryptocurrency, investors turned to gold as a way to combat inflation prices. Nowadays, the modern take on purchasing physical gold is to purchase the virtual equivalent “digital gold” – also known as Bitcoin. The cyber alternative has opened a new platform for investors to open their portfolios when inflation prices pose a challenge.
There are other forms of digital currencies outside of bitcoin for investors to consider:
- Ethereum (ETH)
- Litecoin (LTC)
- Cardano (ADA)
- Olkadot (DOT)
- Stellar (XLM)
- Dogecoin (DOGE)
As an investment strategy, investing in cryptocurrency is beneficial because of the limited supply, which helps protect against inflation rates. However, how this strategy will work over time is unclear.
Now, there are multiple platforms for investors to begin their cryptocurrency strategy. Various apps and websites make the process easy and streamlined for users. A few examples include:
- Coinbase
- Robinhood
- SoFi
- PayPal
- Cash App
Investing in alternative energy
Alternative energy usage has skyrocketed over the past decade. More affordable and accessible hybrid or electric vehicles, like Tesla, have reshaped the way consumers envision efficient energy usage. In 2021, Tesla sold nearly one million cars, which is 87% more than the number sold in 2020.
Tesla isn’t the only electric vehicle company being invested in. Companies like Rivian and Lucid motors are also popular options. If investing in the stock of these companies isn’t the right financial option for you, a great alternative is to invest in an electric vehicle or a renewable energy exchange traded fund (ETF). ETFs allow for your investment to be spread over a range of companies and are less subject to the fluctuations of individual stock options.
Building a portfolio that is inflation-resistant
The impact of rising inflation prices trickles down to almost every aspect of everyday life. The stock market is no exception. While value stocks produce better returns during periods of high inflation, growth stocks produce better returns during low inflation periods.
Knowing the trajectory of the market can help guide your investment decisions. To help protect your portfolio from the rise of inflation prices, wealthy investors tend to favor investing in areas such as:
- Commercial real estate
- Public equities like Amazon
- Consumer staples
- Streaming services
- Cryptocurrency
Purchasing commercial real estate doesn’t always mean purchasing a property and managing it yourself. Real Estate Investment Trusts (REIT) allow investors to invest money in the real estate market to add to their portfolio without the added management of the property itself. Publicly traded REITs can be purchased through a brokerage account and privately traded REITs can be purchased through their specific sites.
Shifting away from FAANG stocks
FAANG or FAAMG (five prominent American technology companies) stocks is the nickname Wall Street has dubbed for the bull market driving forces in the past few years. These companies are:
- Meta-formerly known as Facebook (FB)
- Amazon (AMZN)
- Apple (AAPL)
- Netflix (NFLX) or Microsoft (MSFT)
- Alphabet- the parent company of Google (GOOGL)
These powerhouse companies dominated the stock market in previous years, but they may not hold the same in the future. While Google still saw strong gains in 2021, Facebook and Amazon trailed behind with less force. Slowing rates paired with high inflation rates foreshadow a possible changing tide for these industries. Forbes advisor explains, “some analysts say it’s inevitable that investors will go looking elsewhere for returns in 2022, further benefiting names like Tesla (TSLA).”
Final Thoughts
Rising inflation rates have impacted every investor in the last year. This coming year it’s changing the way investors formulate their investment strategies. You don’t have to be a multi-millionaire to take note of the upcoming trends that may help protect your investments in the future.
As we mentioned, commercial real estate is a stable investment option. As we look to the next year, what’s in store for the commercial real estate industry? Read one of our recent articles, explaining what to look out for in the new year here.