Summary: In this article, you will learn the best investments in 2022. Topics include: how to invest in 2022, trends for investors to know, the best stock market investments, income-producing investments and the best industries to invest in 2022.
How to Invest in 2022
Before we jump into all the details of the best investments for 2022, there are two important philosophies to keep in mind. First, the best investment strategy is a diverse one. Creating a broadly diversified portfolio can lower your risk of loss. A portfolio should include a mix of stocks, bonds, ETFs and cash across different industries. If one investment dips or an entire industry takes a nosedive, your whole portfolio won’t be affected and the loss won’t break your bank.
Second, make and stick to an automatic investment plan. Many investors make emotionally-driven decisions and pull their money out during a down market. Only to watch that market go back up and balance out. Staying in your investments for the long haul is usually the safest and best strategy.
2022 Trends for Investors to Know
The top trends for investors to know in 2022 include: fears of an economic recession come true and potential recovery timeline, an increase in corporate earnings, a climbing stock market, Biden’s Presidency, and a comeback of international markets.
Widespread fears about a possible recession in 2020 came to fruition when the Coronavirus hit the U.S. in 2020. Starting off the year, unemployment rates were at record lows and consumer spending was strong.
Heading into 2022, we are starting to come out of this recession as people have gotten vaccinated and have gone back to work.
So where should you consider investing in 2022? Continue reading for a few ideas.
Best Stock Market Investments in 2022
The health of the stock market in 2022 will depend greatly on the continued effectiveness and distribution of the COVID-19 vaccine.
Here are some of the best stock market investments in 2022:
- Amazon.com (NASDAQ:FB)
- The Trade Desk (NASDAQ:TTD)
- MercadoLibre (NASDAQ:MELI)
- Shopify (NYSE:SHOP)
- T.Rowe Price Global Industrials (RPGIX)
- Materials Select Sector SPDR ETF (XLB)
- MSCI Europe
- MSCI EM
- The Vanguard Total Stock Market ETF (NYSEMKT:VTI)
- The Vanguard Total International Stock ETF (NASDAQ:VXUS)
- Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL)
- Intuitive Surgical (NASDAQ:ISRG)
- Axon Enterprises (NASDAQ:AAXN)
- Verizon Communications (NYSE:VZ)
- Ford Motor Company (NYSE:F)
- General Motors Company (NYSE:GM)
Best Income-Producing Investments in 2022
Here’s a list of some of the best income-producing investments in 2022:
- Energy Pipelines
- Real Estate Investment Trusts
- Overseas Dividend Stocks
- U.S. Telecom Stocks
- Junk Bonds
- Tax-Exempt Muni Bonds
- Taxable Muni Bonds
Energy pipeline operators are an undervalued market, but produce some of the highest returns. Along with appreciation potential, investors can expect dividends between 5% to 9%. Because fewer people are investing in this sector, shares can be bought on the cheap and returns continue to rank among the best.
According to Rob Thummel, a portfolio manager and investor in this sector, “The U.S. needs energy infrastructure, and global energy demand should continue to grow; the sector is undervalued.”
Energy Pipeline Investments to Consider:
- Enterprise Products Partners (EPD)
- Kinder Morgan (KMI)
- Energy Transfer (ET)
- J.P. Morgan Alerian Index MLP
Real Estate Investment Trusts
A Real Estate Investment Trust or REIT is a company that owns income-producing real estate. Types of REITs can include commercial, office, apartments, warehouses, retail, hospitals and hotels. Individuals can buy into an investment trust as part of a larger real estate investment. Some types of REITs are performing better than others, with industrial and apartment REITs producing the best dividend payouts last year.
REIT Investments to Consider:
Overseas Dividend Stocks
Foreign stocks have been producing higher dividend returns than U.S. stocks. If the value of the dollar continues to weaken, international investments should be a good bet. Europe’s two biggest oil companies are making a comeback. Telecom investments in Canada and Asia are also doing well.
Overseas Dividend Stocks to Consider:
U.S. Telecom Stocks
The U.S. telecom sector comes with higher yields and lower valuations. Most of these stocks are inexpensive to buy compared to the potential earnings ratio. The outlook of U.S. telecom stocks for 2021 looks even brighter than last year.
5 U.S. Telecom Stocks to Consider:
Often forgotten, convertibles are a hybrid of stocks and bonds. Convertibles are designed to give investors the upside of stocks and the protection of bonds. There are two common types of convertibles: traditional bonds with a fixed maturity date and “mandatory” convertibles that are equity substitutes.
Traditional convertibles come with more protection, like bonds. Tech and biotech companies also offer convertibles because borrowing costs are so low. Mandatory convertibles often produce higher yields than traditional. The electric utilities sector offers mandatory convertibles to investors, with a typical maturity date of three years.
Convertible Investments to Consider:
Appropriately named “junk” bonds or high-yield bonds, are rated below investment grade. They come with a greater risk of default, but usually pay more than above investment grade bonds, which is how junk bonds attract investors.
In 2019, junk bonds produced one of the highest yield returns in a decade. There is such a thing as “better quality” junk bonds, which may give lower returns but less risk of default. Junk bonds took a big hit in 2020, but have slowly been recovering and look to continue that trend in the coming year.
Junk Bonds to consider:
- Vanguard High-Yield Corporate fund (VWEHX)
- iShares iBoxx High Yield Corporate (HYG)
- SPDR Bloomberg Barclays High Yield (JNK)
Muni Bonds – Tax Exempt & Taxable
Municipal bonds were a bargain a couple of years ago, with investors enjoying returns between 6% and 11%. But these days, investors should expect a 2% to 3% return on muni bonds this year. While there are opportunities for decent returns, 2021 may not be the year for muni bonds to make a big statement.
Government issued treasuries are one of the safest investments out there. But the returns are a measly 1.5%, which is below the current 2% inflation rate. On TIPS or treasury inflation-protected securities, the average return is 2.3% on a 30-year bond. While this return is pretty unremarkable, TIPS protect against rising inflation and can be purchased at a good price.
TIPS to consider:
- iShares TIPS Bond (TIP)
- iShares Short Treasury (SHV)
- iShares 20+ Year Treasury Bond (TLT)
The 9 Best Industries for Investors in 2022
Businesses across many industries had a difficult time staying above water when the Coronavirus pandemic began, but things are starting to turn around. Restaurants and movie theaters are again open and the future looks bright.
Here are the industries expected to see the most growth in 2022:
Biotechnology is an industry that is focused on the manipulation of living organisms to create commercial products. Wait what? In simpler terms, the biotech industry makes products for four major industries: 1) healthcare (medical), 2) crop production and agriculture, 3) non-food (industrial) uses of crops and other products (biodegradable plastics, vegetable oil, biofuels), and 4) environmental uses.
The demand for personal protective equipment or PPE has been enormous throughout this pandemic. Unprepared to meet this unprecedented demand, hospitals and healthcare professionals have had to work with limited resources.
Clinics, hospitals, etc., will make sure they are well stocked in the future. And because most PPE has an expiration date, demand should remain steady.
Additionally, medical device companies should see large gains next year. Consider the medical device maker Boston Scientific (BSX) to see lots of growth over the next several months.
Because biotech makes products across four huge industries, many of which are growing, it’s not hard to see why people are looking to invest here in 2021.
Biotech Investments to Consider:
- iShares Nasdaq Biotechnology ETF (IBB)
- SPDR S&P Biotech ETF (XBI)
- Sanofi (SNY)
- Pfizer (PFE)
- GlaxoSmithKline (GSK)
- AbbVie (ABBV)
- Merck (MRK)
- BioNTech (BNTX)
Technology in education has already been a growing sector around the world with expectations for a lot more growth in the future. As a former teacher myself, the public education system has been slower to bring in new technologies. A huge part of that is due to lack of government funding (and the other small part might be the push back from “old-school” educators). Then COVID-19 hit and everyone had to adapt quickly and take everything online. Suddenly, the expected growth of ed-tech has sped up and will continue to see significant growth in 2021. (Huge props to all the teachers out there working under these difficult circumstances.)
Additionally, eLearning technologies will expand with more options to take classes and learn remotely. Online certification and reskilling is expected to grow with more people choosing virtual learning over face-to-face when given the option.
Online meeting platforms have also seen a ton of growth this year and that’s expected to continue in 2022.
Stocks to consider in ed-tech, eLearning and online meeting platforms include:
- K12 Inc.: (LRN)
- Arco Platform: (ARCO)
- Bright Horizons Family Solutions: (BFAM)
- Global X Education ETF: (EDUT)
- Chegg: (CHGG)
- Dell Technologies: (DELL)
- Zoom Video: (ZM)
- DocuSign: (DOCU)
- Slack: (WORK)
Life & Health Insurance
A global pandemic that has infected millions of people and killed hundreds of thousands is naturally going to benefit the life and health insurance industries financially. With more and more people needing medical care, or at least the safety of having health insurance, it makes sense that life insurance is at the forefront of our minds as well.
Not to mention the explosion in demand for online medical services like doctor visits. This new trend would minimize the need for patients to visit their doctors in person, if possible.
Because we are currently in a pandemic that’s lasted much longer than most of us anticipated and an unknown recovery period, the forecast for health and life insurance looks good in 2021.
Life and health insurance stocks to consider:
- UnitedHealth Group: (UNH)
- Intuitive Surgical: (ISRG)
- Danaher: (DHR)
- Idexx Laboratories: (IDXX)
- Johnson & Johnson: (JNJ)
- Align Technology: (ALGN)
- Teladoc Health: (TDOC)
Cannabidiol or CBD continues to be a popular trend. CBD is a compound found in hemp plants and is now legal in all 50 U.S. states. According to a report by Brightfield Group, since the nationwide legalization the market has grown 132%, and is projected to hit $22 billion by 2022.
Cannabis Investments to Consider:
Artificial Intelligence (AI)
One of the best investments for 2022 is technology, in artificial intelligence. Can you say Tesla? I don’t know about you, but I am mind blown by new cars coming out that drive themselves. The truth is, we’re only scratching the surface when it comes to the possibilities of AI.
Market experts predicted last year that the main drivers in AI would be 5G and cloud technologies. With technology continually changing and innovating, and a heated race between the U.S. and China in AI, this industry should remain a strong investment option in 2022.
The following sub sectors of AI are also expected to be fast-growing in 2022: video games, entertainment streaming services, online fitness, cybersecurity, dating apps, and eco-friendly technologies.
AI Investments to Consider:
- Alphabet’s Google (NASDAQ:GOOG; NASDAQ: GOOGL)
- Netflix (NFLX)
- Baidu (NASDAQ: BIDU)
- NVIDIA (NASDAQ:NVDA)
Oil & Gas Exploration & Storage
It’s been a tough year for energy stocks with a huge drop in demand and supply chains out of whack. Shares in energy companies are expected to bounce back along with an increase in demand for oil and gas storage in 2022.
Oil & Gas Investments to Consider:
- Williams Cos.: (WMB)
- Phillips 66: (PSX)
- Diamondback Energy: (FANG)
- ConocoPhillips: (COP)
- Matador Resources (MTDR)
- SPDR S&P Oil & Gas Equipment & Services ETF (XES)
Real Estate Investment Trusts
Mortgage interest rates remain extremely low, making the real estate industry an appealing place to invest. Because borrowing money is so cheap right now, more people are choosing to buy real estate.
Real Estate Investment Trusts provide an easy way for people to invest in real estate, without having to buy a property themselves. Instead, you buy into a trust with other investors to fund a real estate project.
Co-founder of Fundamental Income in Phoenix, Chris Burbach recommends investing in net-lease REITs. Net-lease means a property is leased to single tenants, who pay rent and property expenses. He says they deliver higher dividend yields and better growth than typical REITs. Investors can also expect cash flow in certain markets, which makes REITs one of the best investments in 2022.
REITs to Consider:
- Global Net Lease (GNL)
- WP Carey Inc. (WPC)
- Pacer Benchmark Industrial Real Estate SCTR ETF (INDS)
- STORE Capital (NYSE:STOR)
Due to the incredible housing shortage in the U.S., experts are predicting that homebuilding stocks will have a strong 2022. Home sales and rental demand hasn’t slowed with the Coronavirus. In fact, it’s been the opposite story in many markets across the country. Even with the economy being in a recession, the housing market is going strong and should stay that way through 2022.
Consider investing in the following homebuilder stocks:
- KB Home: (KBH)
- M.D.C. Holdings, Inc.: (MDC)
- NVR, Inc: (NVR)
- Taylor Morrison Home Corporation: (TMHC)
- Toll Brothers, Inc.: (TOL)
- TRI Pointe Group Inc: (TPH)
Leisure & Hospitality – Travel, Hotels & Airlines
Leisure and hospitality has been a hard hit industry during the pandemic. With the world essentially shutting down, visitors were no longer flying to hotels, Airbnb’s, casinos, and theme parks. Businesses in these industries suffered tremendous losses in 2020, but have began to come back in 2021. These trends should continue as we move into 2022.
Travel and airline industries should have also made a big comeback in 2021 after almost all travel plans were cancelled in 2020. People who were still a little wary to travel in 2021 may be itching to take that European or Latin American vacation in 2022.
Travel, hotel and airline stocks to consider this year include:
- Booking.com & Kayak: Booking Holdings (BKNG)
- Expedia: (EXPE)
- JetBlue: (JBLU)
- Choice Hotels: (CHH)
- InterContinental Hotels Group: (IHG)
- Hilton Worldwide Holdings (HLT)
- Marriott International (MAR)
Environmental, Social & Governance Investing
Environmental, social and governance or ESG refers to investments that seek both financial return and social/environmental good to bring about social change. This type of investing supports sustainable, responsible and impact investing. Between 2005 and 2018, there’s been a 6,417% increase in ESG-based investing and the upward trend is expected to continue in 2021.
Examples of ESG or Impact Investments:
- Investor: Gray Ghost DOEN Social Ventures Cooperatief. Investee: Beam Money Private Limited – Targeted impact: Increase access to financial transaction services for the unbanked. Find their complete profile here.
- Investor: Calvert Foundation. Investee: Craft3 – Target impact: Increase economic opportunity in disadvantaged communities. Find their complete profile here.
- Investor: FMO. Investee: Clean Energy – Target impact: Increase renewable energy use and access in emerging markets in Asia. Find their complete profile here.
For more impact investment profiles across different sectors, visit here.
What to Do Next?
Understanding this year’s unique trends should make it easier to decide on the best investments in 2022. Whether you’re a stock market junky, looking for income-producing investments or interested in expanding into different sectors, smart investors should perform extensive due diligence with the help of a trusted financial advisor. With so many interesting opportunities out there, it’s an exciting time to invest your money and continue your path to financial independence.