A lot of people see investing as a way to increase their wealth, but it’s in times of high inflation that you understand the importance of investing as a hedge to protect your wealth. The worst thing you can do with your money is just keep it in a bank, but investing in it sometimes seems so risky. That is unless you know how to diversify investments properly.
With that in mind, here are a few tips that will help you make better investments and diversify more efficiently in 2024.
- Start with S&P 500
You just can’t go wrong with the S&P 500. Sure, the return isn’t stellar since you’re betting on the winning horse; however, chances of this backfiring are incredibly low. Of course, sometimes the world’s 500 biggest companies fail, however, when that happens, it’s not just your problem, at that point, the whole world has a problem.
One thing worth mentioning is that the S&P 500 isn’t a single company. Instead, it’s a bundle of some of the strongest stocks with the longest track record of stability and gradual growth. If one goes down, the rest usually go up; therefore, you’re always coming out ahead. The only downside is that you won’t be able to see a scenario where the value of your stock doubles in a month like you would with some other investments.
So, generally speaking, people investing in SP 500 are taking the safest bet out there. They’re not looking for a way to make some quick money (which you shouldn’t try to do by investing, to begin with). Instead, they’re looking for a safe way to preserve and slowly grow their capital.
- Cryptocurrencies
Previously, we’ve talked about the importance of keeping the majority of your assets in something solid (something like the world’s biggest, oldest, wealthiest companies). At the same time, you could allocate a part of your assets to a more volatile market, which would allow you to grow your wealth far more rapidly.
Investing in cryptocurrencies really isn’t a problem for anyone who understands risk management.
Can you lose all the assets you put there? Of course, you can; however, this really isn’t a problem if you only invest the money that you can afford to lose. Also, you need to look for an adequate proportionality between the risk and the reward.
Most importantly, you should diversify your crypto portfolio, as well (not just buy a few of the bigger cryptos to diversify your overall investment portfolio).
The thing you need to keep in mind is that investing in crypto is, overall, a better deal today than it was before. Why? Well, because cryptocurrencies have more utility than they ever did. You can use them for anything from paying for your subscriptions to finding a Solana casino to entertain yourself with gambling games. All of this increases both their liquidity and appeal.
- Consider precious metals (not just gold and silver)
Precious metals have a historic appeal to investors. Why? Well, since gold and silver have been both currencies and a store of value since the dawn of civilization (probably even before that), This means that, unlike cryptos that have existed since 2008, gold has a millennia-long history that you can study, research, or feed into an AI analytical tool to predict trends.
Moreover, precious metals have a low correlation with stocks and fiat currencies. In moments of stability, their price goes down, but whenever there’s political or economic turmoil, people lose faith in institutions and organizations. Instead, they start looking forward to assets they can hold in their hands (or pack in their bags).
Now, one of the biggest fallacies about buying precious metals is that gold is the only asset worth buying (occasionally, silver is mentioned, as well). In reality, you have so many other options. For instance, the price of copper has recently climbed, which makes it a valid investment option.
Other than this, precious metals like platinum and palladium are also becoming more and more interesting to investors. Why? Well, because of their increased use in the manufacturing of batteries and electronic parts. High utility always correlates with an increase in value.
- Check out the state of the rental market in 2024
Modest economic growth (slower than last year, but still growing). Sure, the inflation pressure continues, which means that mortgage rates are higher for longer. This is one of the main economic sources keeping the rate of homeownership relatively low. Even beyond financial ramifications, it creates a sort of psychological pressure on those who are to become first-time homeowners.
There are also more first-house homebuyers than were expected, which will drive the cost up. In other words, while investing in the real estate market is generally a good idea for a business (the potential to turn it into a rental property and create a passive stream of revenue or move-in is always there), now might not be the best moment.
On the other hand, the dollar volume of purchase origination is expected to improve, which is a strong indicator that, soon, things might take a turn for the more favorable.
The outlook is optimistic, but caution is warranted. In other words, while this might not be your go-to and while the moment might not yet be ripe, it’s worth making plans to invest in the future. The market won’t go up indefinitely, and being ready will give you a significant head start.
- Keep some of your money in alternative investments
Not all your investments have to be made into stocks, cryptocurrencies, or precious metals. Sometimes, you can find an alternative investment, like a designer bag, and put your money there. Some of these assets are a surprisingly efficient store of value.
Any type of collection can turn out to be a great alternative investment. All you need is something that’s a limited edition, which ensures that it maintains and increases its value. It’s also important that you have the right conditions since a deterioration of its physical condition will drive the price down.
Art is a unique investment idea but not an unexpected one. In fact, when we first started the list of alternative investments, it was probably the first thing that crossed your mind. This form of investment has the same downside as the above-listed collectibles – it has a pretty high knowledge ceiling. You need to be able to recognize something of value and have a pretty deep understanding of the lore behind it.
Wine does pretty much the same thing as art. Older vintages (if they’re the right vintages) will gain value with years.
Lastly, if you have a lot of money and a passion for all things mechanical, you can always invest in vintage cars.
Your investment portfolio is never too low for you to diversify
The biggest misconception about diversifying is that you’re investing too little for this to be necessary (or even possible). After all, if you’re investing so little, why bother splitting it into smaller parts? The problem is that once you start down this road, it becomes harder and harder to make yourself actually do it, yet it’s essential for your financial health and resilience. So, no excuses.
