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7 Investment Opportunities in 2022

December 20, 2021 · 10 minute read

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7 Investment Opportunities in 2022

Getting started investing can seem downright overwhelming.

Newbie investors might find themselves flooded with questions—things like:

•  “how do I start investing?”
•  “what should my asset allocation be?”
•  “where are the best investment opportunities?”
•  “what is asset allocation?”

People can have different goals when it comes to investing. Some may be seeking passive income. Some might be looking for large gains. And, others could simply want to protect their savings.

One easy way to begin weighing investment options might be to research different categories of investments. Categories in investing are often referred to as “asset classes,” an umbrella term referring to a group of investments that share common features.

Of course, it’s not always possible to invest in all asset classes. But, it can be a good idea to develop an understanding of the investment opportunities that are available.

7 Potential Ways to Invest and Build Wealth

7 Potential Ways to Invest and Build Wealth

1. Bonds and Bond Funds

One of the more common investing strategies is to seek a small-but-safe return in bonds.

A bond is defined as a debt-instrument that certifies an amount of money owed by one party to another—typically a corporation or government. Individuals can buy a bond in exchange for earning a fixed-interest rate during the duration of the bond’s maturity. Upon maturity, the bond-holder gets their original investment (known as the principal) back in full.

There are many different types of bonds. The most common and lowest-risk category of bonds might be the US Treasury bonds .

The US Treasury regularly auctions off both short-term and long-term Treasury bonds and notes. These bonds are, generally, thought to be one of the safer investments out there, as they’re guaranteed by the US government. The only way for investors to lose their entire investment would be for the US government to become insolvent, which is widely regarded as highly unlikely.

But, governments are not the only entities that issue bonds.

Corporations can also raise money by offering corporate bonds. These types of bonds tend to carry higher risk, but they often pay a higher rate of interest (known as the yield).

A bond’s price is the inverse of its yield. This means that as the price of a bond falls, its yield goes up (and vice versa).

Recently, for the first time in recorded history, sovereign bonds in some nations have shown negative yields. In that case, investors actually lose money by holding on to those bonds.

The subject of negative interest rates is complex. But, it’s a possibility that investors might want to think about researching. In 2020 in the US, futures markets for the first time priced in the possibility of negative rates as early as 2021.

Some traders who place bets on future price movements (futures contracts) have begun betting that US bond yields could head into the negative territory. This doesn’t mean negative interest rates are coming for sure, but certain investors appear to believe this to be a possibility.

For new investors, one of the simpler ways to gain exposure to bonds might be through various exchange-traded funds (ETFs)—and some Bond ETFs invest, specifically, in particular types of bonds. Other ETFs may include some as part of a broader bundle of securities.

2. Real Estate or REITs

Real estate is the largest asset class in the world, with a market cap of at least $9.6 trillion.

When thinking about real estate, residential properties may be one of the first things that comes to mind —such as, a single family home. Owning property, like a home, can come with an array of responsibilities, liabilities, and expenses.

Annual property taxes, maintenance and upkeep, and paying back mortgage interest can add to the cost of treating a home as an investment. (Residential properties can appreciate or depreciate in value).

Other real-estate investment options involve owning multi-family rental properties, commercial properties like shopping malls, or office buildings. These require large investments, but those who own them could reap significant returns from rental income. (Naturally, few investments guarantee returns and rental demands and pricing can change over time).

For people with smaller amounts of capital, investing in physical real estate might not be a realistic or desirable option. Fortunately for these investors, some investment opportunities can provide exposure to real estate without the hassle and liability of owning physical property. One common way to do this is through Real Estate Investment Trusts (aka REITs).

Companies can be classified as REITs if they derive at least 75% of their income from the operation, maintenance, or mortgaging of real estate. Additionally, 75% of a REITs assets must also be held in the form of real property or loans directly tied to them.

There are many different types of REITs. Some examples of the types of properties that different REITs might
specialize in include:

•  Residential real estate
•  Data centers
•  Commercial real estate
•  Healthcare

Shares of a REIT can be purchased and held in a brokerage account, just like a stock or ETF.

REITs are popular among passive-income investors, as they tend to have high dividend yields because they are required by law to pass on 90% of their amount of their income to shareholders.

Historically, REITs have often provided better returns than fixed-income assets like bonds, although REITs do carry higher risk.

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3. ETFs and Passive Investing

Exchange-traded funds (ETFs) have become one popular investment opportunity. An ETF is a security that usually tracks a specific industry or index by investing in any number of stocks or other financial instruments.

ETFs are commonly referred to as one kind of “passive investing,” because they don’t require investors to manage anything on their own. Investors only have to buy shares and hold them, as they would any other security.

These days, there are ETFs for various goals and economic sectors. Small cap stocks, large cap stocks, international stocks, short-term bonds, long-term bonds, corporate bonds…the list goes on.

It’s sort of like smartphone apps – just as there’s an app for almost everything a user can think of, there’s an ETF for almost any kind of investment an investor could want.

Some potential advantages of ETFs include convenience and diversification. Rather than having to pick and choose different stocks, investors can choose shares of a single ETF to buy, gaining some level of ownership in the fund’s underlying assets.

An ETF could make the process of buying into different investments easier, while potentially increasing portfolio diversification (i.e., investing in distinct types of assets) as well. A single ETF might contain an array of assets it tracks, or investors could buy into multiple more specialized ETFs.

4. Automated Investing

Another form of passive investing involves what are referred to as “robo advisors.”

Robo Advisors aren’t an asset class per se—instead, they’re services that let investors automatically invest in a broad range of securities. Most often, this includes a variety of stocks, REITs, bonds, and ETFs that provide exposure to many different asset classes.

How does it work? Simple.

Robo Advisors begin by asking investors a few basic questions. This process usually takes 5 – 10 minutes. The questions ask about investing goals, risk tolerance, and how many years from now an investor expects to retire.

Based on the answers to these questions, a robo advisor will allocate an investor’s capital according to one of several pre-made portfolios. They might have names like “conservative,” “moderately conservative,” “aggressive,” and so on.

Generally speaking, more conservative portfolios tend to have greater investments into bonds and large cap dividend stocks, while riskier portfolios tend to invest more into small cap stocks, international stocks, and real estate.

For investors who would rather “set it and forget it” than have to pick and choose securities, robo advisors could be one automated investment option.

5. Gold and Silver Assets

Gold is one of the most tried and true of all asset classes. For thousands of years, in cultures and civilizations throughout the world, gold has been prized. The yellow metal is scarce, difficult to obtain, has many practical uses, and does not rest, tarnish, or erode.

Silver has historically held a secondary role to gold as a monetary metal, and today serves much more of an industrial role. For those looking to invest in physical precious metals, silver will be the most affordable option among related investment opportunities.

But, buying bullion (coins and bars) isn’t the only way to invest in silver and gold. There are many related securities that allow investors to gain exposure to precious metals.

For starters, there are ETFs that tend to track the prices of gold and silver, respectively. Other ETFsprovide an easy vehicle for investing in gold and silver mining stocks.

Companies that explore for and mine silver and gold tend to see their share prices increase in tandem with prices for the physical metals.

But historically, mining stocks have outperformed simply holding metals by a factor of about 4-to-1 on average. In other words, if the price of gold were to go up 50%, the price of the average mining stock might go up about 200%.

Gold, silver, and related securities are widely considered to be “safe havens,” meaning most investors perceive them as low-risk. This asset class tends to perform well during times of crisis (gold hit a record high in US dollars in August of 2020, for example).

Gold also performs well when a “fiat currency” (aka paper money) depreciates, which can happen when people lose faith in a currency or when governments increase the money supply too rapidly.

6. Investing in Startups

While gold is often considered to be one of the safer investments, startup investing is often considered to be one of the riskiest.

Whereas gold is a real asset almost certain to retain most or all of its value, startup investments rely on the potential of a new company and might go to zero (because the vast majority of new companies fail).

Then again, with higher risk there’s a chance of higher reward. Although buying lots of gold isn’t likely to make anyone rich, investing in the right startup potentially could.

Imagine buying a little piece of a tech company when those companies were still in their infancy. When held throughout the years, an investment like that could grow enormously in value.

Angel investing and venture capital are two common ways that startups raise capital. They are both types of equity financing, whereby a business funds or expands its operations by offering investors a stake of ownership in the company. If the company does well, investors stand to profit.

Because standard business loans tend to require some kind of assets as collateral (that newer companies that might be information-based likely do not have), raising funds in this way is sometimes the only solution startups have.

Venture capital is often associated with the tech industry, due to the large number of entrepreneurs in the industry who have turned to venture capital funds to start their businesses. This type of fund targets new companies and aims to help them grow to the next level.

Angel investing is similar to venture capital, although even riskier. An angel investor might be an individual who’s willing to give an otherwise struggling company a chance to redeem themselves.

Startup investing requires good business acumen, an eye for promising ideas, and high risk tolerance.

7. Bitcoin and Cryptocurrencies

Because the technology is still relatively new (nearly 14 years old), and volatility reigns supreme, cryptocurrencies are widely considered a high-risk asset class. Some cryptocurrencies have periodically displayed extraordinary gains relative to the value of fiat currencies, in addition to phenomenal losses. Despite these fluctuations, certain investors have begun to include some types of crypto in their asset portfolios. It’s worth noting that the value of cryptocurrencies is volatile and, as with other higher-risk investments, there’s no guarantee of continued returns.

When an investor’s portfolio contains both riskier assets (i.e., cryptocurrency) and less-risky holdings or investments (i.e., bonds), it’s possible that certain losses could be mitigated by more stable returns.

This is what financial experts refer to as “asymmetric upside.” The word “asymmetric” means being weighted heavily to one side more than the other. The trade is asymmetric in that it’s possible to be exposed to huge rewards while taking on minimal risk.

In the past year alone, a growing number of large companies and ultra-rich investors have hopped on the cryptocurrency boat.

One final note about cryptocurrency investing. Tokens other than Bitcoin, collectively referred to as “altcoins,” can be highly speculative, risky, and volatile, much more so than Bitcoin, which has a far larger market cap than any of its peers.

Weighing Different Investment Opportunities

An investor’s journey has to begin somewhere. The investment opportunities described above are just some potential points of entry for beginning investors.

SoFi Invest® lets individuals begin online investing with ease. Investors can choose from stocks, ETFs, IPO investing, crypto, and more. Investors don’t pay SoFi commissions, and they can get started with as little as a few dollars.

Start investing with SoFi.

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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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