If you have $100,000 to invest in 2024, you can set yourself on the path to financial freedom. And here's some even better news: You can set yourself on that path with just about any amount, as long as you invest it wisely.
No one knows whether the market will extend last year's gains, stagnate, or retreat in 2024, but whatever happens, a well-thought-out portfolio can help you manage and even win this year -- and most importantly, you'll put in place the elements you need to win over the long term. Below, I'll talk about how to invest your six-figure nest egg this year, but you can follow the same plan with a much smaller investment.
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Comfort with risk
First, it's important to consider some basics, and that starts with understanding your comfort with risk. If your priority is growth and losses won't keep you up at night, you're an aggressive investor and can go for those high-risk/high-reward opportunities. If you prefer slower, steady gains or worry about losses, you're a cautious investor and should avoid high-risk investments.
Both investment styles are perfectly fine and could lead to significant gains down the road. But to make your investment experience enjoyable, it's best to stick with the style you're most comfortable with -- and that will guide your choices.
We'll talk more about that later when we discuss where to invest this year. First, though, a note on another basic: diversification.
Unless you're an investment professional with a solid reason for focusing on just one area, it's generally best to spread your investments across different stocks and industries. This doesn't mean invest in things you don't know anything about, though. For instance, if you don't understand biotech and aren't interested in learning about it, you're better off avoiding the area and diversifying across other industries.
Why diversify? Because if one stock or group of stocks in your portfolio falls out of favor, your other investments may compensate and limit your losses.
A bull market is coming
Now let's get to the juicy part: Where should you put your $100,000 (or less) in 2024? Considering bear markets eventually lead to bull markets -- and indexes touched bear territory in 2022 -- it's fair to say a bull market is coming. To prepare, it's a great idea to pick up some growth stocks because they generally thrive in this sort of environment.
If you're a cautious investor, you may choose to put a small amount of your money to work here and favor growth stocks that have proven themselves over time -- such as Apple (NASDAQ: AAPL) or Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) -- with tremendous gains in earnings and share prices.
If you're an aggressive investor, you might decide to place a much higher bet in this area. And you also may try a few younger growth stocks that carry more risk but offer you greater potential for gains, like cell engineering company Ginkgo Bioworks or a recovery story like Teladoc Health. You also might consider players in cutting-edge technologies like gene editing and scoop up shares of CRISPR Therapeutics.
At the start of this year, it's also a great idea to look for a few promising stocks with solid long-term prospects that missed out on last year's rally. Two good examples are Moderna (NASDAQ: MRNA) and Chewy (NYSE: CHWY).
Biotech company Moderna has nine late-stage programs in the pipeline that could result in a new era of growth as soon as next year. And online pet supplies shop Chewy recently became profitable and has increased revenue and kept loyal customers even through tough market times. These two happen to be growth stocks, but you also may find opportunities in other areas and across industries.
You might consider placing a big bet on these laggards if you're an aggressive investor, but scale that down to your comfort level if you're a cautious investor.
What stocks should cautious investors buy?
If you're cautious, which areas should you favor in 2024? Consumer staples or healthcare make terrific buys that should keep your portfolio growing over time. We often consider these players "safe" because they sell products people depend on no matter what the economy is doing -- and that ensures a certain level of earnings stability.
Cautious investors also could pick up dividend stocks this year to collect on passive income right away and over time.
This doesn't mean aggressive investors should avoid safe stocks and dividend players. They may, however, want to make smaller bets in these areas and use a bigger chunk of their cash to buy growth stocks.
Last but not least, it's a great idea for any investor with $100,000 to put aside about $10,000 as an opportunity fund. This is money you can dig into during the year whenever a buying opportunity arises.
How should you divide up your money across all of the potential investments I mentioned above? This depends on your own personal comfort with each stock, industry, and investment category. But generally, I recommend aggressive investors favor higher-growth areas, even putting 50% of their investment into growth -- while cautious investors should put most of their dollars into safer plays and dividend stocks.
Finally, invest in stocks that could shine in 2024 -- as long as they also offer top long-term prospects. The best way to win in the stock market is through buying a high-quality stock and holding it for the long haul.
