The current macroeconomic landscape is undoubtedly challenging, with persistent inflation and high interest rates dampening growth prospects. Yet, like any market phase, this period of uncertainty will prove to be cyclical. But even when the market bounces back, you'll find me still buying Tesla (TSLA -1.11%), Vanguard's Mega Cap Growth ETF (MGK 1.87%), and Bitcoin (BTC -1.89%).
While some investors may shy away from these assets due to their volatility, they all possess unique characteristics that can provide attractive returns in both bear and bull markets. Here's why these three assets are worth considering as long-term investments, regardless of the market conditions.
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The undisputed EV champ has more to offer
It has been a strange year for Tesla. The stock is up nearly 100%, but the bullish sentiment that propelled it to an all-time high of more than $430 in 2021 has dissipated. The leading cause explaining Tesla's recent woes is the high interest rate environment.
As consumers spend less on luxury items like new cars, Tesla implemented a series of price cuts to stimulate purchases. While this has kept deliveries near record highs, it has hit the company's gross profit margin. Since hitting an industry-leading 22%, gross profit now sits at just under 18%.
Although some issues may arise during this period of high interest rates, Tesla will continue to be a valuable investment for years to come. The primary reason is the increasing demand and adoption of electric vehicles (EVs). With Tesla's expertise in the EV supply chain and the construction of new factories to increase overall production, it is clear that the company will benefit greatly.
Yet the most compelling aspect of Tesla's long-term value is its role in creating cutting-edge technology. Using its formidable $26 billion in cash to invest in research and development efforts, Tesla is pioneering technology to produce new business models, such as a robotaxi business, and licensing its supercomputer, Dojo, to other companies looking to train their own artificial intelligence models. Tesla's dominance of the EV industry makes it a worthy investment, but its position on the technological frontier means its best days remain ahead.
An easy choice for every investor
While not technically a stock, the Vanguard Mega Cap Growth ETF has become one of my favorite parts of my portfolio. Tracking the CRSP US Mega Cap Growth Index, this Vanguard exchange-traded fund offers a convenient and diversified way to gain exposure to the most prominent growth stocks in the market.
With its growth focus, this ETF is heavily concentrated among tech giants like Apple, Microsoft, Amazon, Alphabet, and Nvidia. But what is most alluring is its diversification among high-growth companies in other sectors, such as Eli Lilly, Costco Wholesale, and Visa, to name a few. Add it all up and the ETF is up a whopping 110% over the last five years.
The diversity of companies within this ETF makes it a solid asset to hold, no matter if the economy is in a bull market or a bear market. Surely, an economic backdrop more conducive to growth would treat the ETF well, but even in the current economic shakiness, the Vanguard Mega Cap Growth presents a valuable opportunity to grab some of the best companies in the world.
The original cryptocurrency might just be getting started
Again, this one isn't technically a stock, but Bitcoin is one of those assets that has proven to be a valuable long-term investment no matter what the market is doing. Critics often point to higher levels of volatility or the steep declines Bitcoin has fallen into. Yet they fail to recognize that the world's original cryptocurrency has been one of the most productive assets over the last 15 years.
History shows that even investors who bought at Bitcoin's peaks tend to be rewarded, so long as they hold on for the long haul. There are likely several reasons explaining this phenomenon, but the most apparent has to do with the continued reduction of its issuance rate.
Roughly every four years, Bitcoin undergoes what is referred to as a halving. This hardwired event underpins the cryptocurrency's monetary policy, prioritizing scarcity and integrity. With three halvings already under its belt, Bitcoin's current inflation rate is just a measly 1.75%. But in April 2024, the next halving will occur, taking its inflation rate to around 0.875%. This process will continue until Bitcoin's capped supply of 21 million is reached, at which point no new Bitcoins will be issued.
Due to a combination of factors, such as Bitcoin's inherent characteristics (finite supply, decentralization, and impenetrable security) along with trends of cryptocurrency legitimization and continued debasement of fiat currencies around the world, it is one of the few assets ideally suited for investors to buy and hold regardless of economic conditions. As more halvings occur and demand continues to compete for Bitcoin's finite nature, don't be surprised if its price eventually goes to the proverbial moon.
