The days of easy money are over – at least for the immediate future.
For much of the past decade, , investors could put money into the market and almost always watch their balances rise. And after two short months of recession in 2020, stocks resumed their uptrend, hitting record highs, until recently.
With the highest inflation rate in 40 years, interest rates rising, stock indexes plunging double digits, and economic uncertainty, it’s getting tougher to find a place to invest in stocks and earn a decent return.
But financial advisors say it’s still possible. The first piece of advice: when the economy changes, investors need to change with it.
“We encourage investors to embrace the realities of this new environment,” John Lynch, chief investment officer at Comerica Wealth Management, said.
With that mindset in place, here are tips to help you find the best stocks to invest in now.
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What stock should I buy in 2022?
Without low-interest rates and low inflation to fuel growth and technology stocks, investors should start moving into value stocks, experts say.
Value stocks tend to get passed over by investors during bull markets for high-flying growth and technology shares, resulting in their becoming undervalued relative to their balance sheets, earnings growth, and cash flow.
But now that those high-fliers are in the dumps, investors should take another look at value stocks, experts said. During tumultuous times, they tend to be stable investments with long-term growth potential because the companies are usually mature with reliable earnings and sales growth and may even pay dividends.
Dividend power
When the market is topsy-turvy and capital gains are hard to come by, financial advisors say consider dividend-paying stocks. Not only do they tend to be less volatile than non-dividend-paying stocks, but they can provide you with some steady income during uncertain times.
Or if you reinvest the dividends, you’ll benefit from the power of compounding. Using your dividends to buy more shares that pay more dividends will grow your money exponentially.
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If you hold the stock long enough, dividends from most companies with stocks traded on major U.S. stock exchanges are often tax advantaged, too. In some instances, qualified dividends will be tax free, but they’ll always be taxed at a lower rate than ordinary income.