We're heading into the third year of the coronavirus pandemic, and so far, the S&P 500 has shown that it can withstand the turmoil. It climbed 27% in 2021 and 16% in 2020. That makes me optimistic that in this latest stage of the crisis, the benchmark index (and stocks in general) may head for another positive year.
So we should feel confident about investing today, even if the world around us looks and feels a lot different than it did a few years ago. OK, so the market as a whole looks good. But what particular assets are likely to make the best bets right now for the long-term investor? Should we hop on the bandwagon and go all in on popular areas like cryptocurrencies? Or is it best to stick with safe and steady dividend stocks?
There are many possibilities. But here, I'll share my best plan for investing $100,000 (or any other amount) in 2022.
Image source: Getty Images.
Today's hottest areas
My goal always is to create or maintain a well-balanced portfolio. I love investing in some of the day's hottest areas. But within reason. I wouldn't recommend putting all of your money into cryptocurrency, for example. This area is highly risky because we don't know if it truly will take off in the long term. That doesn't mean you should avoid cryptocurrency entirely. But you shouldn't invest more than you can afford to lose. On a total $100,000, I would feel comfortable investing about $10,000 in the strongest players -- such as Bitcoin (you can buy a fraction of a token on some platforms) or Ethereum.
Moving along to stocks. I would favor companies that have performed well during the pandemic and offer a positive post-pandemic outlook. By performance, I mean revenue growth and the stocks' momentum. And if the company is profitable, too, that's even better. A few companies that fit into this category are Target (TGT 1.28%), Etsy (ETSY -0.22%), Moderna (MRNA -1.39%), and Pfizer (PFE -0.12%). Their shares have climbed over the past year.
TGT data by YCharts.
Earnings have increased at Target and Etsy in recent years.
TGT net income (annual) data by YCharts.
And earnings this year have taken off at both Moderna and Pfizer.
MRNA revenue (quarterly) data by YCharts.
But there's evidence these companies will continue to flourish after the health crisis, too. Online shopping isn't a short-lived trend. It's here to stay, analysts predict. And strong players like Target and Etsy will benefit.
As for Moderna and Pfizer, they should continue to benefit from coronavirus vaccine revenue for quite some time. And their vast pipelines may help them deliver revenue outside of the coronavirus space in the future. So I would invest about $30,000 in these sorts of stocks.
Stock market laggards
This doesn't mean I would be afraid of investing in stock market laggards. In fact, I would be ready to put about $20,000 into stocks that have suffered even though their overall outlook is positive.
Vertex Pharmaceuticals (VRTX 0.10%), Teladoc Health (TDOC 0.30%), and Amazon (AMZN -1.14%) are three great examples. Vertex is set to hold leadership in the billion-dollar cystic fibrosis market until at least the late 2030s. Teladoc's revenue and virtual medical visits are soaring, and analysts forecast major growth for the industry. And I like the strength of Amazon's cloud computing business and the depth of its retail offerings. It's unlikely any near-term bumps will tarnish the long-term picture.
As a long-term investor, it's important to think of passive income. And that's why I would invest $20,000 in stocks I know won't disappoint in this area. I'm talking about Dividend Kings, those that have increased dividend payments annually for at least the past 50 years. A couple of good examples are healthcare giant Johnson & Johnson (JNJ 0.67%) and Warren Buffett favorite Coca-Cola (KO 0.68%). Both of these companies offer a dividend yield of more than 2%.
JNJ dividend yield data by YCharts.
We now have about $20,000 left. Of that, I would put about $5,000 in market leaders with a significant moat: companies that have a clear advantage over competitors. This means it's difficult for another player to unseat them. Here, a good example is Intuitive Surgical (ISRG -0.41%). The company holds nearly 80% of the robotic surgery market. And once hospitals have invested in a costly system, it's unlikely they'll replace it.
Another example is Tesla (TSLA -3.55%). Rivals are working in the electric vehicle space. But Tesla's brand strength and innovation may make it hard for others to catch up.
Tomorrow's game changers
I would put about $5,000 in up-and-coming game changers. The biotech space is a good place to look for these companies. One example is Vaxart (VXRT -2.75%). It's working on vaccine candidates -- including one for COVID-19 -- given in pill form. These sorts of companies often are risky because they don't yet have products on the market. But if they win, rewards could be big.
And finally, I would set aside $10,000 as an opportunity fund. It's great to have some cash on hand if a new stock catches your eye down the road, or if a favorite dips and you want to add to your position.
As I mentioned above, you can apply this strategy even if you don't have $100,000 to invest this year. Just scale it down to suit your budget. You also can adjust this plan according to your risk tolerance. Finally, what I like most about this particular strategy is it makes it easy to diversify. And diversification is one of the keys to long-term investing success.
