4 Ways the Rich Will Be Investing in 2024

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The new year is a time to make resolutions, set goals and find ways to make this year better than the last. That makes it a great time to give your financial plan a thorough checkup.

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A lot can change in a year, and it’s wise to review your budget, savings plan and investing strategy on a periodic basis to be sure it fits your personal situation. External factors matter as well, especially for investing — the economic and political outlook for the year ahead should to some degree inform every investor’s strategy.

Wealthy people certainly update their investments on a regular basis. While the wealthy often have access to paid advice and unusual investments that normal people don’t, that doesn’t mean there aren’t ways for the average investor to follow suit.

In fact, the wide availability of exchange-traded funds (ETFs) covering just about every strategy there makes it relatively easy. Here are four ways that financial planners and investment advisors say their wealthy clients will be investing in 2024.

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Small-Cap Stocks

When you hear a stock being called large cap or small cap, that refers to the market capitalization of the company, which is its total price for all shares. Obviously, the bigger the company, the bigger the market cap, all other things being equal. While the stock market as a whole had a very strong year in 2023, gaining 24%, very big companies — sometimes called mega caps — drove a big portion of that gain.

“S&P 500 returns are increasingly driven by the Magnificent Seven — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla — which make up around 30% of the S&P 500’s market capitalization,” said Lori Van Dusen, founder and CEO of the wealth management firm LVW Advisors. “The S&P 500 has broadened recently in terms of performance, but investors with concentration here may need to rebalance and consider more undervalued segments.”

Small-cap stocks could be one such segment that investors should look to for cheaper valuations. While wealthy individuals typically have professional advisors that can pick out stocks for them, it’s still easy for the average person to invest in a diversified portfolio of small-cap stocks through an ETF.

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Investment-Grade Bonds

If you’re not familiar with bonds, they are a debt instrument that businesses and governments issue to raise money. Investors who buy them receive regular payments of interest as well as the return of their principal at the end of a specified time frame. During times of low interest rates, bonds may not be very attractive investments — although they are low risk, the returns are too low for the majority of investors.

However, we are no longer in a low-interest environment, and rates are the highest they’ve been in over two decades.

“As interest rates have risen, most companies have paused issuing debt,” said Christopher T. Sargent, portfolio manager at Bradley, Foster & Sargent. “In 2024, I think we’re likely to see quality companies issuing high-paying bonds. These can be a good complement to government bonds in a portfolio. Keep an eye out for bonds from high-quality, profitable companies.”

There are plenty of bond ETFs out there to choose from. Make sure the one you choose is investing in corporate bonds that are investment grade. This ensures that the bonds in the ETF were all offered by companies that got high ratings from the credit agencies.

Real Assets

Real assets are investments that are tangible in nature. Unlike financial instruments such as stocks and bonds, which derive their value from a claim like ownership or contract rights, real assets get their value from intrinsic properties. That’s a long way of saying they are real things instead of pieces of paper or an entry in your brokerage’s computer system. Commodities, real estate, land and natural resources like water are all examples of real assets.

“Given the inflationary pressures, there’s a noticeable shift toward investments that traditionally hedge against inflation,” said Khwan Hathai, CFP, CFT and founder of Epiphany Financial Therapy. “Real assets, like real estate and commodities, have gained more attention as they tend to maintain value when inflation rises.”

Real assets are one of the classic examples of investments that the wealthy can make that are out of reach of the average person, with the possible exception of smaller real estate. Most of us can’t realistically buy farm land or water rights. However, retail investors can access investing in some forms of real assets through — you guessed it — ETFs, which offer the ability to invest in real estate, natural resources and commodities.

ESG Stocks

Environmental, social and governance investing is also sometimes referred to as socially responsible investing. As the name implies, it means considering factors beyond just the financial prospects of a business when making investment decisions. How a company relates to the environment, society and its own internal stakeholders become just as important as its profitability and growth.

“In 2024, wealthy investors are increasingly focused on ethical investing, backing companies and causes that align with their values like clean energy and social enterprises,” said Nathan Jacobs, senior researcher at The Money Mongers. “This is not just for do-gooding but also financial upside in fast-growing areas.”

While ESG investing is not as well established as categories such as bonds and real assets, there are still a number of ETFs available for retail investors interested in ESG. Some are even further specialized by criteria like industry or company size. Since this category requires more active management, be sure to check the expense ratio of any ETF before investing. High fees can eat away at your returns over time.

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This article originally appeared on GOBankingRates.com: 4 Ways the Rich Will Be Investing in 2024