Personal Investing in 2023
- Author: Jenny Wolff
- Posted: 2024-04-23
This month, the failure of two banks was a sign that personal investing could be unpredictable in 2023. The news about Silicon Valley Bank and Signature Bank shook stock markets and put fear into many investors.
Yet, as with past surprising moments, markets stabilized and have rebounded this week. This back-and-forth trend with the markets reveals how this year will most likely proceed. One safe option for personal investing this year is to stay the course and ride out these cycles. Yet, there are other options to consider.
The Market and Investment Approaches
The market downturn this month was reminiscent of the recent past. At the end of last year, many investors thought about pulling out of the stock market because of the downturn that happened then.
Yet, financial advisors still stress that it’s best to ride out such market disturbances. This year will have its share of ups and downs, but those who wait it out will benefit over those who do not. Both the S&P and Dow Jones have historically provided positive returns.
In 2020, with the onset of COVID-19, the market also became destabilized, and investors experienced major losses. But investments did recover and have done so this year. So, one approach is to wait out these downturns in the market and keep current investments where they are.
However, a second approach for this year is to re-assess one’s investment approach. For starters, an investor can re-examine the mixture of stocks and bonds being invested in. Some financial experts, for example, are favoring placing more money in bonds this year to ride out the volatility.
A third approach is to shift investment funds into certificates of deposit. These accounts are currently offering 4% interest rates or higher and are protected from market swings. The downside here is that an investor could lose out on market gains.
This year could be a good time to ride out the cycles or make some changes to the investment mix.
Types of Investments in 2023
Given the unpredictability of this year, investors could prioritize fixed-income strategies. Two options to consider are Treasury bonds and Corporate bonds.
Two-year Treasury bonds are currently yielding more than 4%, which is higher than the 10 and 30-year bonds at about 3%. Corporate bonds are also a good option since they are currently at a 5% interest rate.
High-yield savings accounts are another personal investment option. These accounts provide higher returns than regular savings and are not as risky as stocks, bonds, or 401(k)’s. They are also protected by the FDIC.
Certificates of Deposit are also an attractive option this year. CDs make sense for those investors who do not need access to cash quickly. They are also offered by banks at higher interest rates than normal savings accounts and are great for beginning investors.
Personal investing in S&P 500 Index funds is another route to pursue but does come with this year’s fluctuating risks. Overall, index funds are less risky because they spread out the investment in multiple companies. Yet, they are still considered stocks and do correspond with the S&P 500.
Investment Strategies in 2023
Personal investing comes down to several decisions about an investor’s goals. For example, one investor may concentrate on balancing and diversifying investments to spread out risk.
In this case, the strategy is to build a portfolio with investments across different groupings. A good starting point is to consider the mix between larger and small companies, the growth rate of funds, and ways to balance investments in government and corporate bonds. Given this year’s volatility, an investor could look into investing in stable areas like healthcare.
Another strategy is to generate more cash flow for retirement. In this scenario, those nearing retirement may look to invest in U.S. Treasury bonds or Corporate bonds to provide extra income in retirement.
A third strategy for this year is to explore alternative investments. This approach is geared toward those who are more comfortable with a higher risk-to-reward ratio. Advisors are currently recommending investing in hedge funds or real estate, which tend to do better during times of higher inflation.
Personal Investing This Year
This year will continue to have its ups and downs, and personal investing may come down to waiting out these cycles. Yet, other options are out there for investors looking to assess their current investment mix. To learn more about personal investing and get more advice in 2023, visit FlourishDaily.
