Outstanding performance in the stock market last year has left investors wondering what to do with their portfolios. Here are three great investment ideas for 2014.
1. Buy high-quality growth stocks
Investors should consider high-quality growth stocks for 2014. Growth stocks boast higher annual revenue and earnings-per-share growth than the market on average, which can translate into higher long-term returns.
Apple (AAPL 4.86%) is a prime example of a high-quality growth stock. The company boasts an iconic brand that's recognized worldwide, a loyal customer base, and a strong cash-allocation plan. Last year, Apple announced a significant increase in the company's program to return capital to shareholders, including a major share repurchase program and a 15% hike in the dividend. Going forward, Apple must increasingly rely on innovative new products and new product categories like wearables and TVs to reignite revenue and profit growth. Apple also hopes its recent China Mobile (CHL) deal will help it to boost sales in the world's largest smartphone market. High-quality growth stocks like Apple are sure to be among the top investment ideas for 2014.
2. Consider a different type of income investment
Income investors should look to energy master limited partnerships, or MLPs, in 2014. MLPs offer high current income, steady dividend growth, inflation protection, and tax advantages. On top of those benefits, they also offer capital appreciation as the domestic energy boom continues.
You can purchase MLPs directly or buy a fund specializing in this industry. For direct purchase, look at a pipeline company like North America's largest midstream energy company, Kinder Morgan Energy Partners LP (NYSE: KMP). The company recently offered guidance through 2016, projecting distribution growth of 5% annually. To achieve this growth and profit from growing U.S. production, the company will expand its pipeline network. Because pipeline companies don't depend on the price of oil and gas, they offer a reliable dividend. Kinder Morgan's dividend yield is 6.8%. The company has steadily increased its distributable cash flow over the past several years and raised its dividend by more than 5% last year. Management expects to grow core operating earnings by 13% next year, most of which will be funneled straight to its unit holders.
Investors can also consider MLP exchange-traded funds (ETFs). Owning a variety of MLPs through a fund reduces company-specific risk. As the U.S. moves closer to energy self-sufficiency, an MLP ETF is a more diversified way to capitalize on our domestic oil boom. One example is the Alerian MLP Index ETF (AMLP -2.81%), which offers a low-fee, indexed approach. Its return is driven by the performance of the 25 MLPs that comprise the underlying index. The ETF pays a dividend yielding 6% and has outperformed the energy sector since the fund's 2010 inception. Look for energy MLPs to be among the best investment ideas for 2014.
3. Keep your emotions in check
The stock market is off to a rocky start in 2014, leaving some investors feeling overly emotional. Yet the single most important thing you can do is keep your emotions in check. Investment decisions are often rushed by fear and greed -- and neither results in a good outcome.
Warren Buffett once said: "Success in investing doesn't correlate with IQ. ... What you need is the temperament to control the urges that get other people into trouble in investing." Leave it to Warren Buffett to sum up one of the best investment ideas for 2014 and beyond.