Where to invest now

Before we talk about where to invest now, let’s clarify what we mean by “invest”.

We often use the word “invest” generically to cover any of these activities:

Types of Investments

A conservative investor with a well-diversified Portfolio engages in all of these activities and distributes their money into a range of asset classes. Some of the assets provide income - others provide the opportunity for capital gains. The ideal mix of assets is different for each investor depending on their investing objectives, stage of life, and tolerance for risk.

We will use the generic definition of “invest” in order to include the speculative asset classes in this discussion of where to invest now.

If you prefer video content, the video below covers the contents of this web page with additional insights from Bryan Post.

Where to invest now

Investment asset classes

Deciding where to invest now is similar to dining at a restaurant. In both cases we have to know what our choices are before we can do anything.

The restaurant makes it easy for us by providing a menu. In the investing world we have to create our own menu.

For the sake of this conversation, we will use this table as our menu:

asset classes in Investment

Best place to invest money now

Based on this menu of Investment options a conservative investor might decide that now is not the time to be taking risks with their money.

One of the themes that we can see in this menu is that small investors (you and I) are going to get stuck holding the bag as asset classes decline in value. Money managers are going to protect themselves and their large investors by closing or throttling the exits on the funds that they manage. So far, we have investors being locked-in to both REITs and Crypto by the people who manage those assets.

Although it isn’t obvious, many residential Real Estate investors are also locked-in because market values have declined and buyer demand has diminished.

I don’t know about you, but I’m not interested in any Investment where my money may get locked-in to an asset that is declining in value (REITs, Crypto, Real Estate).

That leaves Stocks, Bonds, and Precious metals as potential asset classes for where to invest now.

Stocks

Stocks are at historic (i.e., unsustainable) highs based on any metric you want to use. To think that they can go higher from here it is necessary to believe that “this time is different”. In contrast to wishful thinking, a sober analysis of the equity markets has to include the fact that prices peaked in late-2021 to early-2022.

Perhaps the recent market action is just a correction, but it is also possible that Stocks have entered a secular (i.e., multi-year) Bear Market.

Until the equity markets break above their prior highs it is best to take a defensive stance towards Stocks. That could suggest that the equity portion of our Investment Portfolio consists primarily of dividend-paying Stocks. If we are going to accept the Market risk of investing in Stocks, we should at least get paid for doing so.

Another defensive tactic might be stock-picking within sectors that have fundamental reasons for growth – right now (early March 2023) those sectors would include defense (drones in particular) and energy (natural gas in particular).

If we want to be really conservative, we can reduce or eliminate our exposure to the Stock markets until the primary trend becomes clear. In a secular Bear market, a 50% decline from peak values would not be unprecedented. For that to occur today, Stocks would have to lose another 30% (or more) of their value. If that decline occurs, we will see Mutual funds and ETFs locking their exits as investors try to remove what's left of their money.

With Stocks off the table for most investors, we are down to just Bonds and Precious metals - where to invest now is becoming obvious through the simple process of elimination.

Bonds

Bonds were a good Investment for the past 40 years because interest rates fell steadily throughout that period. Bond investors received interest income while also enjoying capital gains. That's a double win!

The Bond-friendly environment changed in early-2020, however, and now Bond values are falling as interest rates rise.

There are several trends driving interest rates higher:

foreign buyers have largely stopped purchasing US Treasury debt
some holders of US debt (China in particular) are reducing or eliminating all Western Bonds (and currencies) from their reserves
the US government is running multi-trillion-dollar deficits year-after-year – this deficit spending is funded by selling Treasury debt

In a market with few buyers and an over-abundance of supply, interest rates have to rise in order to attract investors. The trends above suggest that interest rates will continue rising for several years as potential Bond buyers continue to shun this asset class.

Buying Bonds in an environment of rising rates is a guaranteed way to lose money. Unless you have a compelling reason to invest in debt instruments, stay away.

Precious metals

Given our menu of Investment choices and the current state of the Financial markets, the best choice for where to invest now is clearly the Precious metals.

It is worth restating at this point that Gold falls into the “Financial insurance” category that we defined above. There are times in the investing world when return OF Investment is more important than return ON Investment – it is quite likely that we are living through one of those times right now.

In other words, now is not the time to be taking Financial risks. If you have new money to invest, park at least some of it in physical Silver and Gold. If you are protecting your existing Investments, consider moving at least 3 to 10% of your overall Portfolio value into physical Precious metals.

Where to invest money to get good returns

With the current state of the Financial markets there really are no good places to invest money where we can also get good returns.

Remember that our definition of an Investment includes an income stream and a medium to low risk level.

In the past we might have used a Bond laddering strategy to create a low-risk income stream but, as stated above, buying Bonds in an environment of rising interest rates is a losing proposition.

Owning rental Real Estate has been another traditional way to create an income stream but rising ownership costs and a declining pool of potential renters makes being a landlord a losing proposition.

To gain a meaningful income stream right now we have to take on a lot of risk (Market risk, Currency risk, Geopolitical risk, etc.) which means we are actually speculating, not investing.

We might get good returns on our "Investment" for some period of time, but we could also lose a significant percentage of our capital in a market correction (or collapse).

Guaranteed 10% return on Investment

There are no guarantees in the world of investing.

With that said, there are a few high-yield ETFs that we can "invest in" (speculate in) if we are determined to find a "guaranteed" 10% return on Investment. Here are two examples:

JEPI (JPM Equity Premium Income ETF)

The dividend yield on JEPI is just over 11% (as of Feb 2023). The dividend is paid monthly. The ETF sells covered calls against the Portfolio’s large-cap Stock holdings. Selling covered calls is a relatively low-risk strategy in a declining market.

SDIV (Global X SuperDividend ETF)

SDIV is currently yielding 12.3% (as of Feb 2023). The yield was as high as 16% in late-2022. The ETF holds the equities of 100 hand-picked companies which offer some of the highest dividend yields in the world. These securities offer high yields because they are also high in risk (REITs, Chinese Real Estate developers, mortgage lenders, etc.).

So we have at least two ETFs that could provide a "guaranteed" 10% return on Investment.

If we really needed an income stream right now, JEPI would be on our short list of possible Investments. Because equity markets are most likely in a multi-year downtrend, JEPI's covered call strategy is appealing.

Before buying any shares of JEPI, however, we would do some due diligence on the ETF's history. How did it perform during the Financial crisis in 2008? What about the big scary plunge in March of 2020? If another market upset occurs, do we want any of our money in shares of JEPI? That's a question that each of us has to answer for ourselves.

In contrast to JEPI, I wouldn't touch SDIV with the proverbial 10-foot barge pole. Like all securities, buying SDIV involves Market risk (equity markets could crash), but more importantly, the ETF consists primarily of holdings that will decline in value as interest rates continue to rise.

What to invest in right now Crypto

Investors and speculators have lost $2 trillion dollars in the Crypto markets since Bitcoin peaked in October 2021.

Notice also that the first Bitcoin ETF was launched at the peak of the market. It's almost like Wall Street did a pump-and-dump on these ETF investors.

(not that Wall Street would ever take advantage of retail investors...)

Like most Investments, Crypto attracts both cheerleaders and naysayers. The cheerleaders would have us believe that Crypto can solve all of the world's financial challenges. The naysayers maintain that Crypto Coins and Tokens are digital Beanie Babies with an intrinsic value of zero.

Whether Crypto has value or not, governments are going to launch their own CBDCs (central bank digital currency) and they are unlikely to allow competition from non-central-bank Coins and Tokens.

There is already a push from US senators and Financial market regulators for increased oversight of the Crypto markets. The bankruptcy of FTX in November 2022 raised the volume on these calls for government regulation of the Crypto markets.

Existing Crypto has two likely futures:

1) The government regulates them out of existence or into irrelevance

2) Additional bankruptcies and revelations of fraud (Tether anyone?) cause investors to exit the Crypto markets with whatever money they have left

In either case, the future value of Crypto is likely to be far lower than it is today. When you are considering where to invest now, only invest money in Crypto that you would be very comfortable losing.

In Summary

We've covered a lot of ground in our discussion of where to invest now. Let's recap the main points:

"Investing" is a generic term that encompasses speculation, Investment, and financial insurance
as asset values continue to decline in the gathering global recession, retail investors are going to be stuck holding the bag
Stocks are historically overvalued by all measures - thinking they can go higher during a recession is wishful thinking

US Stock markets peaked in late-2021 or early-2022 and they are now down more than 15%
in a Bear Market, Stocks typically lose at least 50% of their peak value - that means Stocks could decline another 30% or more before starting any kind of sustainable uptrend
Bonds ended a 40-year long Bull Market in 2020 when interest rates turned sharply higher
interest rates are likely to continue higher and remain elevated for an extended period as Bond issuers attempt to attract buyers
the "Fed pivot" isn't going to happen - see the previous bullet point - Bond buyers are already sitting on the sidelines - having the Fed pivot back to lower interest rates isn't going to bring back reluctant debt buyers
the future for existing Crypto Coins and Tokens does not look bright - bankruptcies and fraud are already decimating this asset class and coming government regulation is likely to be the fatal blow

Now is the time to focus on capital preservation rather than capital growth. There are five types of Financial risk (market, credit, liquidity, operational, and legal) and at least three of them are currently elevated. As the global recession accelerates at least one of these risks is going to explode and that will take asset values far lower.

Here at Satori Traders we recommend that all investors protect their Wealth with physical Precious metals.

Computer models show that Investment Portfolios perform better in all market conditions when they have a 3 to 10% exposure to physical Gold.

You can achieve this diversification with

physical Precious metals that you purchase with after tax-money
a Gold IRA that you establish using tax-advantaged money
a combination of the two

You can find more information about investing in physical Precious metals and Gold IRAs on the pages of this website. If you have a specific question about investing in Silver and Gold, drop us a line and we will do our best to provide an answer.

Connect with us : Satori Traders

Investor Resources

Wealth management Books

Understanding price action and having basic Technical analysis skills are two of the keys to being a successful Investment advisor (IA).

Financial professionals of all varieties will find value in this Wealth management book.

Harvest Bountiful Trading Profits Using Andrews Pitchfork:

Price Action Trading with 80% Accuracy Paperback

by Bryan V Post, February 2021

Regardless of our Trading strategy or the time frame in which we choose to trade, we all have to answer the same question when sitting down to look at price charts: "What is going on with this market and how do I trade it profitably?"

Day trading, Swing trading, Position trading, Trend following - our strategy for interacting with the financial markets doesn't matter. Regardless of what we are trying to accomplish in the markets, we need to first figure out what price is doing.

Part I of this book focuses specifically on Andrews Pitchfork, the basic principles for using forks, and the five Andrews Pitchfork rules.

The second half of the book is about understanding price behavior: what price is doing now and what it is likely to do in the future.

By integrating the techniques in Part I and Part II a trader can build a framework within which they can apply their entry/ exit strategies and money/ risk management techniques. Old pros and newbies alike will find value in this book.

Gold Investment advice

Individual retirement accounts (IRAs) can be funded with either pre-tax income (Traditional IRA) or post-tax income (Roth IRA).

Traditional IRAs are typically used to hold securities like mutual funds, stocks, and bonds.

The Taxpayer Relief Act of 1997 provided new retirement options for taxpayers including the self-directed IRA.

This new Investment vehicle allowed investors to own asset classes like real estate, fine art, and Precious metals inside their tax-advantaged retirement accounts.

In a self-directed IRA the investor can open a brokerage account in order to actively or semi-actively trade securities inside their tax-advantage retirement account. Faster growth of the account is possible because 100% of all trading profits can be compounded without the loss caused by annual capital gains taxes.

During the Precious metals bull market that ran from 2002 to 2012 investor demand for Gold IRAs increased significantly.

"Gold IRAs" are also known as “Precious metals IRAs” and “Silver IRAs”. These Investment vehicles are all the same thing: a self-directed IRA holding one or more of the four IRS-allowed physical Precious metals (Gold, Silver, Platinum, and Palladium).

Throughout the 2002 to 2012 period existing Investment management companies responded to this demand while new companies sprang into existence with a singular focus on providing Precious metals IRAs. The creation of new Gold IRA products accelerated after the 2008 financial crisis.

Best Investments to make money : Files