Protect against inflation and generate income.
Investing in 2023
2022 was a difficult year for investors as central banks around the world aggressively tightened financial conditions by raising interest rates with the explicit goal of reducing inflation. Even though inflation is cooling, it remains at elevated levels. Along with recessionary risks, investors need to be positioned appropriately in 2023 to navigate these challenges. Many of us depend on our investments’ success to achieve our goals, care for our families, or keep our standard of living. Overall, investors should be seeking a risk-adjusted strategy. Below we will dive into some of the best investment options for 2023 and beyond. If you are looking for guidance on tailor-made solutions for your portfolio and financial objectives, please contact the experts at Alpen Partners to find success in this new year.
Best Investments for 2023
We have listed below some of the options to consider for 2023.
These investments protect against inflation whilst offering long-term growth prospects.
High-Quality Growing Cash-Flow Generating Stocks
When purchasing stocks, investors buy a percentage of a company, known as equity. The value of the equity is based on the estimate of how much the company is worth and how many shares of the company are issued. When an investor owns stock, he owns a piece of the underlying business. High-quality growing cash-flow generating stocks typically offer higher long-term returns to investors and are less volatile. They tend to enjoy oligopolistic positions with significant pricing power and the ability to pass on rising costs to their consumers. Importantly, they are operationally more stable and sustain higher levels of profitability relative to the average equity universe, particularly during a weaker macro-economic environment.
Dividend stocks are shares of businesses that make regular and above-average distributions to investors in the form of steady cash payments. Many companies will offer dividend stock to reward and attract investors. These stocks are an essential component in a portfolio as a source of income for investors. Some companies offer 2-3% dividend yielding returns annually but will often present a higher total return as the business grows and does well. If you are interested in stocks that will grow at a higher rate than dividends, look into growth stocks.
Growth stocks are shares in companies that are expected to display a higher rate of operational performance than the average growth of the market, and consequently earn higher share price appreciation. Typically, these stocks won’t pay dividends since the management of these companies are looking to reinvest the earnings into the business to accelerate short-term growth. Often, growth stocks are smaller, newer companies, and leverage new technologies. While growth stocks are often more volatile, they can provide above-average returns to investors.
Another excellent investment option for 2023 is REITs. A real estate investment trust, or REIT, is a company that owns or finances income-producing real estate. These trusts are usually traded on major exchanges and offer diversification benefit to a portfolio. REITs are backed by actual assets and have a history of serving as effective inflation hedges in terms of overall returns and dividend growth. Historically, REITs have offered an attractive dividend yield that was higher than the broader securities universe.
Many investors will place a portion of their wealth into another country’s currency to fight inflation in their home currency. Foreign currency can protect an investor from political or economic events that could affect their current investments. Capital appreciation is also possible through investing in currencies. Similar to stocks and commodities, the value of a currency can increase, meaning the investor can profit by holding it. One of the strongest and most stable currencies today is the Swiss franc (CHF), the national currency of Switzerland. The franc’s value has historically been seen by international investors as a safe haven, particularly when other European countries are facing economic obstacles. This makes the franc attractive to investors. With a stable political and economic system coupled with a robust financial banking environment backing the franc, investing in the currency proves to be an intelligent decision over time. There are several easy ways to invest in the franc, such as through ETFs and the forex market.
Exchange-traded funds are a type of pooled investment instrument that holds a basket of securities such as bonds, equities, commodities, or currencies. They can be bought or sold on exchanges the same way a common stock can. They enjoy high levels of daily liquidity and low expense ratios. This makes them more cost-effective than mutual fund shares. Like stocks, ETFs experience daily price changes as they are bought and sold. With ETFs, investors can gain the diversification of an index and track a wide range of securities. The exchange-traded funds make it easy for investors to build their portfolios by meeting asset allocation needs.
Mutual funds are pools of capital collected by investors, which are invested into stocks, bonds, and other types of instruments. Money managers look over these funds and invest the money for the benefit of a group of investors. Like ETFs, they allow investors to gain from investment styles (sectors, growth/value, countries, regions, large capitalisation, small capitalisations, etc) they may not invest in individually – with less risk and less cost. Mutual funds allow for a less expensive way to diversify a portfolio with a single purchase. Mutual funds are both investments and companies. The same way a person buys a share of a company, they buy part ownership of a mutual fund and the assets within.
High-yielding savings accounts
Investors often look to high-yielding savings or deposits accounts since they offer 20-25 times higher interest rates than a traditional savings account. Typically, individuals will hold high-yielding savings account at the bank they already work with, which means transferring money is easy and happens with little to no fees.
An investment is considered alternative when it doesn’t fall into any of the traditional asset classes. Some popular alternative investments include commodities, cryptocurrencies, private equity, private debt, hedge funds, and art collecting. These investments are usually held by institutional investors and high net-worth individuals. Alternative investments often have lower levels of liquidity, which some investors may not favor. Still, they can be a great option for a portion of your wealth, as a hedge or source of diversification. Pension funds and other long term institutional investors often favor larger weights of their portfolios in alternative investments due to their long-term investment horizons.
Investing in real estate is a great way to combat inflation, invest in foreign economies, and hold wealth offshore. In addition, some real estate investments can earn the investor and their family permanent residence, such as the Golden Visa in Portugal. Also, earning income from rental properties works well because when inflation rises, so does the amount an investor can charge in rent.
Also known as an individual retirement account, an IRA is an investment account that helps individuals save for retirement with tax-free growth or on a tax-deferred basis. A Roth IRA is not set up between an employer and an employee. Instead, a Roth IRA account is set up between an individual and an investment firm. The money can be invested in any way the IRA holder wishes. There will most likely be a healthy range of stocks and other kinds of equities to choose from. Another perk is that money in a Roth IRA can be inherited tax-free.
Investing with Alpen Partners
Alpen Partners offers expert investment guidance, wealth management, family office, and personal financial services to high-earning investors worldwide. With close relationships with leading Swiss banks, our team can get you on the right track to not only protect your wealth during a challenging time but also grow your wealth simultaneously. Our goal is to find the best investment opportunity for you, whether it is used to alleviate the effects of inflation or any other financial goal you which to achieve. Connect with Alpen Partners today if you are ready to strengthen your portfolio.
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