3 Best Investments for 2021

October 8, 2021

Thinking of getting started with investing in 2021? Now is the time to get started. After all, there are only two (legal) ways to earn money in this life: earning money through your job and growing the money you have through investing.

That’s a big deal, considering that most Americans are extremely vulnerable to economic ebbs and flows. In fact, 35% of Americans don’t have any retirement savings at all, and 40% of Americans are one missed paycheck away from poverty.

The trick is knowing where to begin.

The best place to start isn’t by researching high-performing companies. Instead, start by learning the basics, like which asset classes to invest in. Here’s a quick review of asset classes and some of the best to invest in this year.

What are Asset Classes?

An asset class is simply a group of similar investment vehicles which are subject to the same regulations because they share the same characteristics. Each asset class comprises investment tools that behave similarly in the market.

Most financial advisors use five asset classes:

  1. Stocks or equities
  2. Bonds or fixed-income securities
  3. Cash or cash equivalents
  4. Tangible or real assets
  5. Forex, futures, and derivatives

Of course, there are quite a lot of investment vehicles available to new investors, and not all of them are easy to classify at first blush. This periodic table of asset classes is a handy tool to get started.

The Best Investments for 2021

With that in mind, let’s take a look at some of the best investments for 2021, grouped by their asset classes.

Equities: S&P 500 Index Funds

Listen, you could invest in Apple stock. But the truth is, stocks are volatile, and you need a lot of diversity to cushion ebbs and flows. Unless you’re versed in trading and can dedicate time in front of a computer, it will be hard to get that diversity.

Well, if you don’t invest in S&P 500 index funds, anyway.

An index fund is a type of mutual fund or exchange-traded fund with a portfolio constructed to track or match the components of a financial market index. When you buy into an index fund, you buy shares with every company in the index, which means instant diversification.

The S&P 500 index is a market-capitalization-weighted index of 500 large-cap companies that collectively comprise 80% of U.S. equity by market cap. S&P 500 index funds allow you to invest in the portfolio of companies in the fund.

In plain English: you get to invest in a portfolio of the highest-performing companies in the U.S. market, all in one fell swoop. Plus, there are companies from every industry, so you get a diverse portfolio that’s more resilient than most, with an average 10% return annually. Keep in mind that you should plan on staying invested for at least three to five years.

Alternative Investment: Real Estate Investment Trust

Okay, to be perfectly honest, real estate is a funky asset to categorize. Technically, land can be considered a tangible asset. But a real estate investment trust (REIT), a company that owns, operates, or finances investment real estate, is a bit trickier to classify.

For simplicity’s sake, we’re referring to REITs simply as alternative investments, i.e. investments that do not fit into the conventional three categories (stocks, bonds, or cash) and real estate in general as a tangible asset.

When you picture crowdfunded real estate, you’re more or less picturing REITs. In the pre-REIT years, real estate was an asset limited to the wealthy, and then those who knew their way around large financial intermediaries for purchasing. REITs are the best way for Joe Average to invest in real estate.

Most REITs use the same basic business model. They buy a space, lease it, collect rent from the tenants, and distribute the income as dividends to investors, much like dividends being distributed to company shareholders. That way, everyone gets a share based on their percentage ownership and no one has to sink obscene money into a single property.

The good news is that investing in REITs is pretty straightforward—you can buy shares in publicly traded REITs through a qualified broker. For non-publicly-traded REITs, you need to purchase shares through a broker who participates in the offering.

Real Assets: Blue-Chip Art

If S&P 500 index funds sounded like exactly your cup of tea, what if we said you could buy into real assets that outperformed the S&P 500 Index by 180% from 2000 to 2018? Better still, an asset that gives you a hedge against inflation (and thus the perfect rescue asset to hold steady against fluctuations in the market)?

Yup, we’re talking about blue-chip art.

Art is among the most successful forms of passion investing, and blue-chip art is the highest-performing. Blue-chip art, named for the most valuable chip on the poker table, is art of significant economic value which is expected to hold steady or increase in value regardless of the economy as a whole (this refers solely to the art’s resale value, not its value to the collector, a museum, or history). These works are typically made by recognized heavyweights with a stellar performance record on the auction market.

Once upon a time, this was the playground to the ultra-rich. Fortunately, like REITs, there’s now a way for the average investor to see some of those returns while investing in something they love.

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.