At some point before the end of 2023, it became apparent: the recession that was widely expected, if not feared, did not materialize. Not only that, but inflation has waned, unemployment is low, and growth is strong. But is now a good time to invest? The answer is yes but read on for more.
Here are some of the top reasons why it is a good idea to start investing now:
Before looking into the most suitable investment approach, investors should consider their financial situation, including their monthly expenses and obligations. They must also factor in how much they can afford to invest, currently as well as on an ongoing basis.
After that, they can consider popular investment strategies such as:
Value Investing. These investors look for stocks that, in their view, are priced below their intrinsic value. The driving theory is that it is possible to buy a stock at discount and profit from it. Mutual funds are popular here, although some investors prefer to use the price-earnings ratio as a tool for uncovering bargain stocks.
This big-picture strategy is most suitable for those seeking to hold onto their securities over the long term, since it may take a while for the underlying companies to scale.
Growth Investing. These investors are known to hunt for “the next big thing,” in terms of upside potential. They gauge the existing health of a stock in addition to growth prospects. This can mean assessing the capabilities of the company’s executive team, and the company’s competition.
By its nature, growth investing is relatively risky and is generally only successful during periods of falling interest rates since that makes it cheaper for newer companies to innovate and expand. It best suits those seeking shorter investing horizons — with more upside than value companies — or those unconcerned with dividends or cash flow.
Momentum Investing. These investors abide by the premise that winners will continue to win, and losers will continue losing. Thus, they seek to buy stocks that are trending upward, and are also strongly dependent on technical analysis.
Traders taking this risky approach must be poised and engaged at all times to buy and sell and use constantly changing data and market sentiment to make investment calls.
Dollar-Cost Averaging. This is the disciplined practice of investing in regular increments, specific strategy notwithstanding, often by using automated features that invest for them. Here, the investor captures all price levels, from low to high. Such regular investments effectively reduce the purchases’ average per-share cost and lowers the prospective taxable basis of shares sold in the future.
The strategy could work for most investors since it keeps them devoted to saving while mitigating risk and the impact of volatility.
Increasingly, investors are adding alternative assets to their portfolio. Basically any asset other than stocks or bonds, alternatives have low correlation to public markets, and so can reduce overall portfolio volatility.
Thanks to private-market investment platforms such as Yieldstreet, on which almost $4 billion has been invested, asset classes such as real estate, private credit, legal finance, art, structured notes, and transportation are more easily accessed.
Alternatives also serve another crucial purpose — portfolio diversification, which is essential to long-term investment success.
Not that long ago, it was common, if not expected, for investment portfolios to be filled exclusively with stocks. Nowadays, however, most investors understand the importance of portfolio diversification, particularly during times of economic instability.
Most seasoned investors and financial professionals recommend diversification because it generally lowers risk exposure without sacrificing returns. In fact, investors holding a diversified portfolio may wind up gaining a higher return over the long term.
What is diversification? It means holding a mix of assets — but not too much of any single investment or type. Each asset type performs differently as the economy thrives and contracts, and each has varying gain and loss potential. In other words, as some assets increase in value, others will hold steady or decrease.
Having a diversified mix of asset classes and investment approaches can also protect against inflation and economic uncertainty. Alternative investments can be a good way to help accomplish this.
Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings.
Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk.
In some cases, this risk can be greater than that of traditional investments.
This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million. These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.
However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments.
Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $10,000.
Given resilient growth and receding inflation, most insights point to optimism across a range of markets, likely making it a good time to invest. Remember that while all investments carry risk, including alternatives in one’s holdings can provide diversification, protect against inflation, and potentially provide better returns.
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.