It is normal to think about where to put our hard-earned money as the year ends and we move forward to the next one. However, doing that in 2023 may be challenging, given the looming recession and other economic fluctuations ahead.
To stay informed while navigating the year, investors may get some ideas from the market trends. That said, here are some of the top trending investments for 2023, namely, stocks, bonds, cryptocurrencies, and real estate.
Stocks
2023 is an ideal time to start for those not investing in the stock market. Stocks will remain one of the top trending investments despite possible economic downturns. Furthermore, they can be good investments for a variety of reasons.
For starters, it has the possibility of long-term growth, which is one of its primary advantages. Historically, stocks have consistently offered larger returns than alternative investment options like bonds or cash.
And since stocks tend to perform differently than other types of investments, they can be a valuable tool to diversify a portfolio as they lower risk. Given these, they are one of the most valuable investments in 2023.
No time to manage stocks? No worries. There are mutual funds managed by professionals that pool investments and choose the right stocks on behalf of the investors. People new to the stock market may find mutual funds helpful as it is easier than buying and managing stocks independently.
What is the best type of stock to invest in, this 2023?
Why invest in defensive stocks?
Defensive stocks are from business sectors like utilities, consumer staples, and healthcare that often perform well when the economy is weak. These businesses might offer necessary goods or services that are always in demand, no matter how the economy is doing.
People often invest in defensive stocks to diversify their portfolios during a recession.
Why invest in value stocks?
Value stocks are shares of businesses that some investors believe to be undervalued in the market. These stocks stand out because of their low price-to-earnings ratio and dividend yield. Often, investors purchase these value stocks in the hopes that the market will one day realize the true worth of the business, therefore increasing the stock price. Furthermore, value stocks may also perform beyond expectations and hold up better than growth stocks.
Despite these opportunities, stocks also have their risks, like the possibility of a principal loss and value loss due to price fluctuations. As such, it is crucial to do extensive research and diversify a portfolio, just like with any investment. Before making any decision, discuss options with a financial advisor or other experts.
Bonds
Bonds are debt securities issued by governments and corporations to raise money. Investors buy the bonds and earn income from their interests. When investors purchase a bond, they lend money to the issuing body. In return, the investor earns interest periodically and from the repayment of the principal when the bond matures.
Because bonds are low-risk investments, adding them to a portfolio is good diversification. Additionally, bonds are also generally safer than stocks since they offer a fixed return of principal at maturity. For risk-averse investors, bonds are the best places to invest money where returns are stable.
Although the income bonds offer is what makes them most appealing, there is another way to earn from them. This is by capital appreciation, or when the bond is sold for more than what was originally paid for. Such instances happen when the interest rates for new bonds decline, making them less marketable than previously issued bonds. Furthermore, existing bonds with higher interest rates become more desirable, and their value increases.
Which bonds are the best to protect a portfolio from the effects of the recession?
Since there are different kinds of bonds, it is important to evaluate each before purchasing. For investors to know if a bond fits in their portfolio, they should look at the following factors:
Check the credit rating
A bond issuer’s creditworthiness is assessed using credit ratings. A high rating suggests a decreased chance of default, meaning the borrower has a high chance of repaying the bond. That said, the wise choice during a recession is to invest in the safest bonds with better credit ratings, such as AAA or AA.
Evaluate maturities
A bond’s maturity is the length of time until its final payment. In other words, it is how long until the investor gets their full bond repayment. During a recession, short-term bonds are less vulnerable to interest rate fluctuations. This way, a bondholder could shield their investments from possible market value dips. On the other hand, long-term bonds are more susceptible to interest rate fluctuations. As a result, they are more exposed to the possible decline in value when interest rates rise.
Summarily, the best bonds will depend on the investor’s financial goals and how much risk they could take.
Cryptocurrencies
Another popular addition to the top trending investments for 2023 is cryptocurrency. Cryptocurrencies are digital assets that use advanced encryption for financial transactions. Basically, they are like virtual money. But unlike the traditional system, cryptocurrency is decentralized, meaning no central bank or government authority issues them.
Is that bad? Not really. Cryptocurrencies use blockchain technology, which allows secure peer-to-peer transactions without a governing body to regulate them. As a result, cryptocurrencies are not tied to countries or economies like fiat currencies and their performance is not as heavily impacted by recessions or other geopolitical events.
How do people earn from cryptocurrencies?
People earn from cryptocurrencies in three major ways: buying and holding, trading, and mining. Like stocks, people can buy cryptocurrencies at a low price, hold them for a period of time, and sell them at a higher price. Furthermore, investors can also trade crypto on exchanges and earn profits from price fluctuations.
Lastly, people with advanced knowledge of blockchain technology can earn by mining cryptocurrencies. As the name suggests, mining adds cryptocurrencies to the ones in circulation, and miners get rewards for their efforts. However, this complex mathematical task is only feasible for a few.
Like any other investment, crypto also has its risks. Like stocks, crypto prices fluctuate. But unlike stocks, fluctuations happen in split seconds. Additionally, trading in crypto has no closing times, so stakes in the exchanges are always in danger of losing value overnight. Before venturing into the crypto world, investors should learn the basics of the technology and the platform so they can better manage their gains and risks according to their appetite.
Real Estate
Last year, real estate in the Philippines was on a recovery run and finished strong at the end of the year. With consumer optimism, Colliers Philippines sees a further expansion in residential developments in 2023, particularly in Metro Manila.
However, recent macroeconomic trends threaten the returned optimism in the real estate industry. The Colliers Global Investor Outlook for Asia Pacific in 2023 highlights a real estate reset as the industry is not immune to the volatility that is currently impacting global markets.
But the firm assures that this reset is not a start of a big decline but rather a “return to relative rationality” of real estate values. Furthermore, this adjustment is also expected to stabilize by mid-2023 as the industry gains a sure footing on interest rate trends.
How can real estate remain a good investment in 2023?
Despite the shifts in the property sector, real estate remains an ideal option. In fact, real estate is still a good investment during a recession for those who can afford its down payment and other upfront costs.
When selecting a property, make sure it is a key area that can weather an economic downturn. Next, consider the demand of the location. If there is a rental demand in the area, purchasing a property amid unstable times can still make it a profitable investment.
Ultimately, it boils down to the investor’s needs, goals, and purchasing power. No matter the economic condition, real estate properties are good investments for those who can afford them.
During uncertain times, invest in a trusted developer with decades of experience like Camella. For your value-for-money real estate property options, check out Camella’s house and lot and condo properties for sale. Located in key cities and towns across the Philippines, Camella offers a home at the center of everything that matters.
