Today we are going to know about the 11 best investments in 2022. If we want to enjoy a comfortable financial future, investing is one of the most effective tools. As the Covid-19 pandemic demonstrated, a stable economy can quickly turn around, and people or companies that were unprepared for such a change have been greatly affected, both in their businesses and family economies.
The big problem lies in the enormous inflation that we are suffering; Treasury bills and bonds cannot overcome it. At the same time, some assets have astronomical valuations, which sometimes makes one wonder if they are worth what they are worth.
What are the best investments you can make this year?
The best idea is that you have a diversified portfolio with less risky assets and others that give you more profitability but assume more significant risk.
I want to remind you that this blog is merely informative and that investment decisions will always depend on your aversion to risk, personal objectives, and economic situation.
You can contact me for more information on managing your investments and developing a strategic investment plan or you can read this for a full guide.
Why invest?
Investing can provide you with another source of income, secure your retirement, or even get you out of financial trouble. Above all, investing grows wealth, helping you reach your financial goals and increase your earning power over time.
Perhaps you do not have very notable savings or may have received a fortune with an inheritance; whatever your situation, it is not competent to leave the money you have in the bank. The smartest thing is that that money works for you.
While it is true that investing can generate wealth, you also have to take certain risks, and based on that, you will get some returns or others. To start investing, it is essential to have correct planning for it, that is:
- Being in an economic situation that allows you to invest
- Have an emergency fund for contingencies
- Ability to withstand market ups and downs without having to touch your money.
- Liquidity fund to take advantage of downturns (opportunity)
- A well-marked investment strategy
Surely these 5 points mentioned above can be a bit complicated for you, depending on the situation. Therefore, having a personal financial advisor to help you is vital; the first consultation is free, and you can contact them today.
There are many ways to invest: from very safe options like certificates of deposit and interest-bearing accounts to medium-risk options like corporate bonds.
We also have higher-risk options such as variable income investment funds. It is excellent news because it means you can find investments that offer a variety of returns and fit your risk profile. It also means that you can combine assets to create a complete and diversified portfolio that is more secure.
High Yield Savings Accounts
A high-yield savings account pays you interest on your account balance. And just like a savings account where you earn pennies at your traditional bank, high-yield savings accounts are perfect for the extra liquid money you have in your account.
Online banks can afford to offer much higher interest rates with fewer structural expenses. In addition, the money is always accessible; that is, it is not blocked. You will be able to make transfers without any problem, and you will be paid for the average sapph. A savings account is a good vehicle for those who need access to liquidity in a short period.
It should note that the average annual APR return is 1.75%
The best investments for
A high-yield savings account works well for risk-averse investors, especially those who need money short-term and want to avoid the risk of not getting their money back.
Risk
Although high-yield savings accounts are considered safe investments, they risk losing purchasing power over time due to inflation if rates are too low. We are currently hovering around 10% inflation in Spain.
You can consult directly with me, and I will advise you on the best checking account that pays interest.
Short-term certificates of deposit
Certificates of Deposit, or CDs, are issued by banks and typically offer a higher interest rate than savings accounts. And short-term CDs may be better options when rates are expected to rise since they allow you to reinvest at higher rates when the CD matures.
These government-insured time deposits have specific maturity dates ranging from several weeks to several years. As they are “term deposits,” you cannot withdraw the money during a particular period.
With a CD, the lender pays you interest at regular intervals. Once it expires, you get back the original principal plus accrued interest. As the macroeconomic outlook currently stands, interest rates are expected to rise and, therefore, this product’s profitability.
Because of their security and higher payments, CDs can be a good option for retirees who don’t need immediate income and may lock up their money for a while, or those who have a surplus in their account that they never use and are more averse to risk.
The comment is that you can always withdraw the money from the fixed term. However, you lose the right to charge any interest.
I work with my clients in an entity offering a deposit of 4% APR in 6 months. You can contact me for more information.
The best investments for
A CD works well for risk-averse investors, especially those who need money at a particular time and can tie up their money for a little more return than they’d find in a savings account.
Risk
CDs are considered safe investments. But they carry a risk of reinvestment :
The risk is that when interest rates fall, investors earn less when they reinvest capital and interest on new deposits is lower, as we saw in 2020 and 2021.
It is important to note that inflation and taxes can significantly erode the purchasing power of your investment.
Short-term public debt funds
Public debt funds are investment funds that invest in debt securities issued by governments worldwide and their corresponding agencies. Like short-term certificates of deposit, short-term government bonds do not expose you to many risks if interest rates rise, as is expected in 2022.
The funds invest in government bonds from around the world, especially in the US, and mortgage-backed securities issued by government-backed companies. These government bond funds are well suited to low-risk investors.
These funds can also be a good option for beginning investors and those looking for cash flow.
The best investments for
Funds that hold government bonds can work well for risk-averse investors, although some types of funds (such as long-term bond funds) can fluctuate much more than short-term funds due to changes in the rate of interest.
Risk
Funds that invest in government debt instruments are considered one of the safest investments because the bonds are backed by the full faith and credit of the respective governments.
If interest rates rise, the prices of existing bonds fall; if interest rates go down, the prices of existing bonds go up.
However, the interest rate risk is higher for long-term bonds than for short-term bonds. Short-term bond funds will have a minimal impact from rising rates, and the funds will gradually increase their interest rate as prevailing rates rise.
However, if inflation remains high, the interest rate may not keep up, and you will lose purchasing power.
You can contact me to do a financial planning study based on your needs and propose which investment fund or funds best suit your situation.
Series I Bonds
The US Treasury issues savings bonds for individual investors, and an exciting option for 2022 is the Series I bond. This bond helps build protection against inflation. It pays a base interest rate and then adds a component based on the inflation rate.
The result: If inflation goes up, so makes the payment.
But vice versa: if inflation goes down, so will the interest rate. The inflation adjustment is readjusted every six months.
Series I bonds bear interest for 30 years.
The best investments for
Like other government-issued debt, Series I bonds are attractive to risk-averse investors who don’t want to take any risk of default. These bonds are also suitable for investors who wish to protect their investment against inflation.
Risk
Series I bonds protect your investment against inflation, which is not the case with common bonds. Like other government-issued debt, these bonds are considered among the safest in the world against default risk.
where to get them
To get this investment fund with inflation-linked bonds, I recommend you open an account at DEGIRO and hire the investment fund AMUNDI ETF EURO INFLATION UCITS DR (C), whose ISIN is FR0010754127.
In any case, you should seek advice from professionals so that they structure your portfolio correctly; you can contact me to make a study of your situation.
Short-Term Corporate Bond Funds
Companies are sometimes financed by issuing debt bonds, which can be grouped into bond funds made up of bonds issued by hundreds of companies. Short-term bonds have an average maturity of one to five years, which makes them less susceptible to fluctuations in interest rates than medium or long-term bonds.
Corporate bond funds can be an excellent option for investors looking for regular liquidity, such as retirees or those who want to reduce the overall risk of their portfolio but still earn a return.
The best investments for
Short-term corporate bond funds can be suitable for risk-averse investors who want a little more return than government bond mutual funds.
Risk
As with other bond funds, short-term corporate bond funds are not government-insured. These funds typically reward investors with higher returns than government bond funds.
These higher returns come with added risk. There is always the possibility that companies will be downgraded or run into financial problems and default on bonds. To reduce that risk, ensure you are well advised and that your fund comprises high-quality corporate bonds.
Investment funds anchored to the world economy
Suppose you want to obtain a higher return than more traditional bank products or bonds. In that case, a good alternative is an investment fund anchored to the world economy, although it carries greater volatility.
The fund is based on thousands of companies globally, which means it comprises many of the world’s most successful companies. For example, Amazon and Berkshire Hathaway are two of the most prominent companies in the index.
Like almost any fund, this one offers immediate diversification, allowing you to own a portion of all those companies. The fund includes companies from all sectors, making it more resilient than many other investments.
Over time, the index has returned about 8% annually.
A fund pegged to the growth of the world economy is an excellent option for beginning investors because it provides broad and diversified exposure to the stock market.
The best investments for 2022
It is a good option for any stock investor looking for a diversified investment that can remain invested for at least three to five years.
Risk
It is one of the least risky ways to invest in stocks because it comprises the leading companies in the market and is highly diversified. Of course, it still includes stocks, so that it will be more volatile than bonds or any banking product.
It’s also not government-insured, so that you can lose money based on price fluctuations. However, the index has performed exceptionally well over time.
We are currently facing a major recession, which is why investing is not just choosing an index and investing. It goes much further. It is necessary to structure a portfolio well based on your vital objectives to reach them. In addition, entry, maintenance and exit management are also crucial within equities.
You can contact me to analyze your situation in depth and make a well-advised recommendation.
Dividend distribution funds
Even your stock investments can be a little safer with stocks that pay dividends.
Dividends are portions of a company’s profits that can be paid to shareholders, usually every quarter. With a dividend-paying stock, not only can you earn on your investment through long-term market appreciation, but you’ll also earn short-term cash.
Whether or not they pay dividends, buying individual stocks is best suited for intermediate and advanced investors. But you can buy a group of them in a stock fund and reduce your risk.
The best investments for 2022
Dividend stock funds are a good choice for almost any stock investor but may be better for those seeking income. Those who need income and can stay invested longer may find them attractive.
Risk
As with any stock investment, dividend stocks carry risk. They are considered safer than growth or non-dividend stocks, but you should choose your portfolio carefully.
Make sure you invest in companies with a strong track record of increasing dividends (EPS) rather than selecting those with the highest current returns. That could be a sign of trouble ahead.
However, even well-regarded companies can be hit by a crisis. Hence, a good reputation is not a protection against the company, as it can cut dividends or eliminate them.
You can eliminate many risks by buying a dividend-paying mutual fund and accessing a diversified portfolio of assets, reducing your dependency on a single company.
where to get it
I cannot offer you a specific platform because you have to be well advised in this type of investment. Most dividend distribution investment funds have a history of negative returns. It can mean that you receive dividends, but your initial investment decreases year after year.
Knowing how to choose quality distribution funds through correct advice is essential. You can contact me to listen to your situation and recommend what best suits your profile.
Value Stock Funds
With many stocks rising in the last two years, which could lead to significant overvaluation, many investors are wondering where they can put their money.
“Value” mutual funds can be a good option. These funds invest in value stocks, that is, in those with a more advantageous price than others in the market. Additionally, value stocks tend to do better when interest rates rise, as is happening in 2022 and are expected to continue for years.
Many value stock funds also pay dividends, making it an added draw for many investors.
The best investment for
Value stock funds are suitable for investors comfortable with the volatility of investing in stocks. Investors in stock funds should also have a long-term investment horizon, at least three to five years, to ride out any bumps in the market.
Risk
Value stock funds tend to be safer than other types of stock funds due to their bargain price, but they are still made up of stocks, so that they will fluctuate much more than safer investments like short-term bonds.
Value stock funds are also not government-insured.
Many Value companies have a bargain price for a reason; that is, if they have a low valuation the vast majority of the time because something is happening in that company. However, if we know how to choose stocks with a bargain price but good fundamentals, you will surely be making a good investment.
Get good advice on choosing the investment funds that make up the highest quality companies.
Tech Backgrounds
A technology fund is an excellent option for investors who want exposure to some of the biggest and best technology companies without having to pick winners and losers or analyze specific companies.
These companies are Apple and Facebook, each comprising a large part of the total index. Microsoft is another prominent member company.
A technology fund can offer you immediate diversification, so your portfolio is not exposed if a company fails.
The best investment for
A technology fund is a good choice for growth-seeking stock investors willing to face significant volatility. Investors must be able to commit to holding it for at least three to five years. Using dollar cost averaging (DCA) to buy into a fund trading at all-time highs can help reduce risk compared to investing all your money at once.
Risk
Like any publicly traded stock, this set of values can also go down. Even if you have some of the most robust technology companies, these companies are often also some of the most valued. That high valuation means they are likely to fall quickly in a recession, though they may rise again during an economic recovery.
Housing rental
Home rental can be an excellent investment if you can manage your properties. Interest rates are skyrocketing, so the cost of variable-rate mortgages will go up. The instability of the economy can make financing increasingly tricky.
Investing in housing is only profitable if you rent by room or get a financed bargain. If you buy a house and rent it traditionally, your profitability will be reduced below 4%
Think that the profitability has to be calculated based on your investment, not on the house’s value. If the average return is 12% or higher, it is a good investment, but as time goes by, you will have made more investments (mortgage payments, spills, taxes, boiler, etc.) which will make the return year after year it decreases.
It is also essential that you identify the moment in the real estate sector in which we find ourselves because if you want to buy, reform and sell, it may be that you get your fingers caught with a significant investment, as happened in 2008.
WARNING:
We currently find ourselves in a leverage ratio of the company in the real estate sector above 2008, which may indicate that we are in a moment of euphoria and, in the medium or short term, entering an extensive real estate recession. The 11 best investments in 2022
The best investment for
Rental homes are a good investment for long-term investors who want to manage their properties and generate regular cash flow.
Risk
As with any asset, you can overpay for housing, which happened to investors from the mid-2000s to 2008. With low-interest rates and a tight supply of homes, home prices skyrocketed in 2020 and 2021, despite the difficulties of the economy. However, interest rates are now beginning to rise.
Remember that lack of liquidity could be a problem if you ever need to access cash quickly. You may have to come up with a lot of money for some expenses, like a new roof or air conditioning, if they are needed. Inflation can drastically affect the replacement costs of these items, and of course, you will run the risk of the property sitting empty while you continue to pay the mortgage.
There are other associated risks, such as non-payment of fees or occupation.
where to get it
You may have to work with a real estate agent to find rental housing, or you can seek out contacts who can get you better deals before they hit the market.
Cryptocurrency
Cryptocurrencies are digital currencies intended to act as a medium of exchange. It has become a fashionable asset in recent years; the printing of money in the world has pushed prices up and attracted many investors.
Bitcoin is the most widespread cryptocurrency, and its price fluctuates significantly, attracting many traders. For example, in early 2020, the price was hovering around $10,000, but in early 2021 Bitcoin spiked to around $30,000 and then doubled above $60,000 before falling back below $30,000.
The beginning of 2022 was rough for the crypto world, as traders increasingly sold their positions and most significant cryptocurrencies fell sharply; however, in the case of Bitcoin, those who bought and held are indeed having a good time. Earnings, despite these ups and downs.
Unlike other assets mentioned here, Bitcoin is not backed by any Central Government nor by the value generated by the company behind it (which there is none). Its value is determined solely by what people are willing to pay for it, often leading to unprecedented speculation.
The best investments for
Cryptocurrency is suitable for risk-seeking investors who don’t mind their investment going to zero in exchange for the chance of a much higher return.
Not a good choice for risk-averse investors or those who need any safe investment.
Risk
Cryptocurrencies have very significant risks, including some that could turn any individual currency into a complete zero, such as the case of Luna-Terra, which caused its investors to lose more than 60,000 million dollars. It can also be outlawed.
Digital currencies are highly volatile and can fall (or rise) precipitously even over brief periods, and the price depends on what people speculate.
Operators are also at risk of being hacked, given some high-profile thefts in the past.
In the crypto ecosystem, there are more than 10,000 cryptocurrencies, and it is estimated that 95% will disappear, so it is essential to rub shoulders with the best so as not to keep your account at 0.
where to get it
I, as a financial advisor, cannot recommend you to invest in cryptocurrencies; my clients, under my recommendations, will not have cryptocurrencies until it is regulated and legalized in Spain.
However, it would be hypocritical for me to say that my clients do not like this world; that is why if you decide to invest, I advise you to do it in the following way :
- Invest with an entity that is regulated in your country of origin and may have strong laws
- Invest in a crypto index; this way, you will be exposed to the top 15-20 cryptocurrencies, reducing your exposure risk.
- Do not invest all your capital at once; you see make progressive entries into the market to take advantage of the volatility that this market has
- Do not allocate more than 3% of your portfolio to this investment.
If you want to access a crypto index, Bitpanda’s is very good; take a look:
Access Bitpanda
Entity regulated in Germany, under the supervision of the European Union, and you can establish a savings plan with very modest amounts, from €25 per month.
What must be considered
When deciding what to invest in, you will need to consider several factors, such as your risk tolerance, time horizon, investment knowledge, financial situation and how much you can invest.
If you want to increase your wealth, you can opt for lower-risk investments with a modest return or take more risk and aim for a higher return.
In investing, there is usually a balance between risk and return. You can also take a balanced approach, having safe money investments while allowing yourself to grow in the long term.
The best investments for 2022 allow you to do both, with different levels of risk and return.
risk tolerance
Risk tolerance refers to what you can bear when there are fluctuations in the value of your investments. Are you willing to take significant risks for potentially big returns? Do you need a more conservative portfolio? Risk tolerance can be a psychological issue that is consistent with your situation.
Conservative investors or those nearing retirement may feel more comfortable allocating a higher percentage of their portfolio to less risky investments. They are also ideal for people who save for short and medium-term goals. If the market turns volatile, investments in CDs and other government-protected accounts won’t lose value and will be there when you need them.
Those with stronger stomachs— for example, workers who are still building retirement savings or those who have a decade or more until they need the money— will probably do better with riskier portfolios, as long as they’re diversified.
A longer time horizon allows you to weather stock volatility and take advantage of its potentially higher return, for example.
Temporal horizon
The time horizon means describing when you need the money:
Do you need the money tomorrow or in 30 years? Are you saving for a down payment on a house in three years, or do you want to use your money for retirement? The time horizon determines what type of investments are most suitable for you. The 11 best investments in 2022
If you have a shorter time horizon, you need the money to be in the account at a particular time and not blocked, so you need liquidity. Therefore you need safer investments, such as savings accounts, certificates of deposit or perhaps bonds. These fluctuate less and are generally safer.
With a longer time horizon, you can afford to take risks with higher-yielding but more volatile investments. Your time horizon allows you to ride out the ups and downs of the market in exchange for higher long-term returns. With a longer time horizon, you can invest in stocks and mutual funds to hold them for at least three to five years.
Your investments must be calibrated based on your time horizon. You don’t want to put next month’s rent money into the stock market and expect to get it out when you need it.
your knowledge
Your investment knowledge plays a critical role in your investments. Investments like savings accounts and certificates of deposit require little knowledge, primarily since the government protects your account. But market-based products like stocks and bonds require more knowledge.
If you want to invest in assets that require more knowledge, you will have to develop your understanding of them. For example, suppose you’re going to invest in individual stocks. In that case, you need a deep understanding of the company, the industry, the products, the competitive landscape, the company’s financials, and much more. Many people do not have the time to invest in this process.
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The 11 best investments in 2022
