The Single Best Investment Class for 2021

October 8, 2021

We often talk about investing as though it’s one collective concept, but in reality, investing is incredibly diverse. What investing looks like depends on your unique portfolio and the blend of assets contained therein.

As a new investor, though, you want to get to the good stuff. Which means you’re likely asking yourself: what is the single best investment I can make for my portfolio?

You came to the right place. Here, we’re breaking down the single best investment class for 2021.

What are Investment Classes?

First, when we’re talking about investment vehicles, investment classes are referred to as asset classes. An asset class is simply a group of investment vehicles exhibiting the same or similar characteristics. Because of this, they are subject to the same laws and regulations.

There’s a fair bit of debate about how many asset classes there are, but most financial analysts agree on the following asset classes:

  • Equities (like stocks)
  • Fixed-income investments (like bonds)
  • Tangible assets (like art)
  • Cash or cash equivalents (like money market funds)
  • Forex, futures, and derivatives

Keep in mind that some assets are difficult to classify. Stock market futures, for example, could technically be classified as both equities and futures. Then there are some assets that are outright confusing, like gold, which is technically a tangible asset but is often sold futures.

What to Consider

Before you dive into asset classes, you have to think about yourself as an investor. Three things, specifically:

  1. Your investment style
  2. Your risk appetite
  3. Your timeline

For example, are you a passive (hands-off) investor or an active (hands-on) investor? Are you a conservative investor, an aggressive investor, or somewhere in between? And how much time do you have to achieve your goals?

If you’re a passive but moderately aggressive investor with decades to achieve your goals, you can look into asset classes that permit a hands-off approach. Conversely, if you’re willing to take risks but you only have a few years to achieve your aims, your priority is capital preservation over growth.

The Single Best Investment Class

So, what is the single best investment class for 2021?

The short answer: there isn’t one.

The slightly longer answer: it depends on what you want.

The truth is, there is no single asset class that will make or break your portfolio. You also shouldn’t build your portfolio around a single asset class—a healthy portfolio is a diversified portfolio. However, there are asset classes that are a good choice for certain goals, and you can craft a diversified portfolio around your unique goals.

With that in mind, here are some of the best asset classes based on what you want to achieve.

To Get Started

If you’re just trying to get started in investing, stocks are the simplest asset out there. They’re wildly common, easy to understand, easy to buy, easy to sell, and easy to find services for.

This does not mean that you’re ready to dive into stocks on your own if you’ve never invested before. For those who are investing for the first time, your best bet is often a robo-advisor platform. These are algorithm-driven platforms that manage your portfolio automatically. They often require low starting investments, and some even allow you to round up and invest your spare change.

If you have invested in stocks before and you want a more hands-on approach than a robo-advisor, you can look into a self-managed brokerage account.

If you want stocks with the benefit of diversification but without the hassle of buying individually, you can look into an index fund, which is a type of mutual fund or exchange-traded fund designed to match the performance of a financial market index. A good example is the S&P 500, which is an index of the 500 largest companies in the United States. When you buy into an index fund, you get shares in every company in the index.

To Diversify

If you already have stocks in your portfolio, it’s time to diversify. That means insulating your portfolio against stock market volatility.

For those hoping to counterbalance against market volatility, a good option is alternative investments (i.e. anything that isn’t stocks, bonds, or cash). These have very low correlation to the stock market, which means they can become rescue assets if the stock market tanks.

Our personal favorite is blue-chip art, which has outperformed the S&P 500 by 180% from 2000 to 2018. It’s long been a popular hedge against inflation, and these days, you don’t need to be named Bezos or Gates to invest in it. On our platform, you can buy shares of multi-million-dollar artwork and profit from the sale.

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.