Smart Money Podcast: Your Money in 2024 – Investment Strategies for Financial Success

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Gain 2024 investment insights and get answers to questions on long-term strategies, stock market volatility, real estate investments trusts and more.

Investing writer Alana Benson joins host Sean Pyles to discuss investing in 2024. They discuss the importance of having a long-term investment strategy, the performance of the stock market in 2023, the impact of interest rates on investments, and the potential for growth in sectors such as AI and green energy. They also touch on the benefits of investing in 10-year Treasury notes (T-notes), real estate investment trusts (REITs) and high-yield savings accounts, among other advice for those looking to grow their wealth by getting into investing in the new year.

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NerdWallet stories related to this episode:

Americans Mixed on 2024 Economic Outlook, Plan to Invest Anyway

How to Find the Best Stocks for Inflation

10-Year Treasury Yield: What It Is and Why It Matters

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

This transcript was generated from podcast audio by an AI tool.

Sean Pyles:

It's a new year, everybody. Do you know how your stocks are doing? Do you have a plan for how you're going to manage risk in the markets? Have you rebalanced your retirement and college savings plans?

Alana Benson:

If you have a well-diversified portfolio and you're investing for the long term, like for retirement, there's no real reason to stress about the ups and downs of the market in the short term. And yes, in this instance, again, one year is the short term.

Sean Pyles:

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Pyles.

Alana Benson:

And I'm Alana Benson.

Sean Pyles:

This episode, we're continuing our Nerdy deep dive, looking at what we can all do to maximize our finances in 2024. The start of a new year is a good time to both take stock of what's happening with our finances and plan out what we might do for the next 12 months. And today we're looking at the year ahead in investing. We're joined by my fellow Nerd, Alana Benson. Welcome back to Smart Money, Alana.

Alana Benson:

Great to be here, Sean. Happy New Year.

Sean Pyles:

Thanks, and back at you. So Alana, you cover investing and you have a crystal ball, right? So you can tell us exactly what's going to happen in the markets this year and what to do with our money.

Alana Benson:

Oh yeah, I definitely have a crystal ball. I know exactly what I'm talking about. No, I wish I had that. I'd be super rich and it would be awesome. But as we all know, that's not how it works. Investing isn't an art or even a science. It's a lot of time, it's mostly luck. And as everyone in the investment industry always says, past performance or how your investments have performed in the past is not an indicator of their future success. So we can't ever really look at what happened last year to figure out what might happen in the future, but we can talk about what to keep an eye out for, different things happening in the market, different things happening in the world, and how to manage your risk.

Sean Pyles:

Okay, fair enough. And just to be crystal clear about this, Alana and I are not investment advisors and aren't going to tell you what to do with your money, but we'll tell you what to know about it and how to think about it. All right, well listener, we want to hear what you think too. To share your thoughts, goals, or concerns around investing in 2024, leave us a voicemail or text the Nerd hotline at (901)-730-6373. That's 901-730-N-E-R-D. Or email a voice memo to [email protected]. Stay with us. We're back with a look at investing in 2024 in just a moment. So Alana, let's start by reviewing the roller coaster ride that was 2023. As the year went on, it seemed like maybe we were heading out of the bear market, but then that upward arrow on stock sheets started to point down again in the fall. And then there was another rally toward the end of the year. Give us a sense of how the stock market performed overall.

Alana Benson:

So before we get into it, I just want to remind everyone listening that investing is a long game. If you look at a single year or a single month or even a single stock's performance, it makes things seem very dramatic. Like middle school cliques dramatic. That being said, 2023, yeah, it wasn't the best for the stock market. Interest rates have been really high, and that means it's been more expensive to companies to borrow money, which in turn helps them grow. It allows them to hire people and produce more products, and that then turns around and makes it harder for them to make money if they can't be doing all of those things, like hiring people and making products that makes them money. So it was a tough year.

Sean Pyles:

Yeah. Well, were there any standout sectors that did especially well or especially poorly?

Alana Benson:

Yeah, technology and services. So think media or personal services, those did pretty well. And kind of surprisingly, utilities and healthcare did less well. But again, I'd encourage our listeners to pay more attention to long-term performance, which when I say long-term, that means 10 or 20 years rather than short-term performance. So even one year is considered short-term performance.

Sean Pyles:

We often talk about not investing money that you'll need within five years. That's something that investment advisors recommend pretty often because of the volatility from one year to the next.

Alana Benson:

Yeah, exactly.

Sean Pyles:

Alana, what kinds of lessons do you think the average investor can or should learn from what happened in 2023?

Alana Benson:

I think the big takeaway is that lulls in the market are pretty normal. Between about 2010 and 2021, we saw one of the biggest bull markets of all time. People got very used to their investments just making lots of money. And if you look at a graph of the stock market or the S&P 500 of all time, the jump between 2010 and 2021 was crazy huge. And with GameStop and everything, there are lots of new investors for whom this year has been one of the first times they've actually experienced down markets or just kind of boring markets. But people need to keep in mind that downturns are part of the market cycle and that they happen and they're just not a reason to not invest your money.

Sean Pyles:

There was a lot of talk toward the end of the year about the bond market, specifically the 10-year Treasury or T-note. One rule of investing has always been that if stocks are sinking, bonds will rise and vice versa. And that has been the basis for the tried and true 40/60 split in, say, retirement or college savings funds. That seemed like it might be falling apart at the end of last year. And there were a lot of headlines about the fundamental shift in how you might want to manage, say, a retirement fund. But then as we said earlier, that changed again in the blink of an eye. What are we to make of this turn of events, and should we expect that the rules can always be upended like that?

Alana Benson:

Yeah, I think it's safe to say that the market's quote "rules" should be taken more as suggestions of what could potentially happen because nothing is guaranteed. I think COVID really taught us that. And since COVID, the economic environment has just been kind of weird. I've heard a lot of people say that the economic vibes are just off, which I think is very true. A lot of people expected a crash right after COVID, but instead we had one of the biggest annual periods of economic growth. Since then, it's been this intense slowing as interest rates have come up to combat inflation. And then recently, the 10-year Treasury took a dive. So does that guarantee stocks will come up a lot? No. Could it happen? Sure. I think this is a lesson to would-be active traders. If you're actively buying and selling your investments, it requires you to be exceptionally good at predicting the economy most of the time. And the reality is that most people simply cannot do that because our reality is inherently unpredictable.

Sean Pyles:

The vast majority of active traders lose money. That's always something that we like to bring up. Okay. Well Alana, let's stop brooding on the past. Tell us, as someone who is steeped in the world of investing, what are you keeping your eye on as we kick off 2024?

Alana Benson:

So one of the things that I'm really looking at is the AI sector. That really exploded in the last year, with some of the top AI stocks coming in at over 200% annual performance. This is an industry that over a year ago the average person hadn't really even heard of. I knew I was very unfamiliar with it. Now, AI is widely known and it's being implemented pretty rapidly. And while it's not investing in the stock market, I'd imagine interest rates are going to stay pretty high for a while. So I would definitely check out high yield savings accounts for things like your emergency fund. Some accounts are offering 5% right now, which is just incredible. You don't have to risk your money in the market and you can access it at any time. There is truly no downside to that and you're just getting money handed to you every single month.

Sean Pyles:

Right. Especially when you compare that to a savings account that's not high yield. You'd be getting pennies compared to what a high yield savings account would give you.

Alana Benson:

Yeah, absolutely. I mean, it's bringing you a return that sometimes investments actually bring you, but it's just a bank account.

Sean Pyles:

Right, it's pretty fantastic right now. But that could all change in a year's time. You never know.

Alana Benson:

Absolutely.

Sean Pyles:

So when we did this episode a year ago, we were expecting a recession and increased stock market volatility. As we record this podcast, we are not anywhere near a recession. What do you think the surprisingly resilient economy means for investors going forward into the new year?

Alana Benson:

I think it's giving a lot of people hope, and in terms of the economy, hope is actually a very, very good thing. So for instance, people thinking that inflation is going up can actually impact inflation and make it go up. It's this crazy phenomenon. And if more people expect the economy and stock market to get better, that makes it more likely that people will invest, which in turn actually helps the stock market get better. There's a lot more psychology in the financial markets than people think, which is really crazy.

Sean Pyles:

Psychology and just vibes on vibes.

Alana Benson:

Vibes.

Sean Pyles:

People are feeling out each other's vibes.

Alana Benson:

So many economic vibes are happening and we just have to keep the economic vibes positive. And it's weird, but that sometimes works and it impacts the economy. And just because we aren't currently in a recession doesn't mean that it couldn't still happen. And I'm sure many investors would like to see more growth. I think a lot will depend on inflation and interest rates. I'd really like to see some companies get creative with their energy uses and lean more toward green energy. I think that that's going to be a big trend in the next year. But I think just over the next 10 years, I think we're going to see a lot of that coming out as well.

Sean Pyles:

I think our climate would be happy to see that as well. Well, given how wrong all of the recession predictions were, any words of advice on how to move through this year by tuning out noise and financial predictions of all kinds?

Alana Benson:

Yeah, especially mine. Don't listen to anything I say. Just kidding. I'd say just try not to worry about it. If you have a well diversified portfolio and you're investing for the long term, like for retirement, there's no real reason to stress about the ups and downs of the market in the short term. And yes, in this instance, again, one year is the short term.

Sean Pyles:

Okay. Well, I want to briefly touch on investing in real estate. The housing market, as you are well aware, has become unaffordable for huge swaths of the country, but that is not the only way people can invest in real estate. And here I'm thinking about real estate investment trusts, or REITs. Can you talk about how these work and how they might fit into folks' portfolios?

Alana Benson:

Yeah, so REITs are companies that own real estate that makes money. So if you think about something like an apartment, you own the apartment, but you theoretically have a tenant in there that's paying you some money that covers the mortgage, but also pays you a little bit extra so you're making money on it. So REITs allow you to own stakes in real estate, just like you can own a stake in a business by buying a stock. But it's great because you don't actually have to own an apartment building and unclogged toilets or any of that. It's very hands-off. So the cool thing about REITs is that they are required to pay 90% of their annual income to shareholders as dividends.

So they consistently offer really, really high dividends, and that just means that every quarter or so on a regular schedule, they will pay you money, which is great. So REITs provide another level of diversification plus the dividends, and that adds a really nice financial incentive. But if you're mostly investing in just companies, like in the S&P 500, investing in REITs adds another layer of that diversification. So if the companies start performing poorly, REITs may or may not be performing poorly, but it gives you another advantage of something that will bolster your portfolio in difficult times.

Sean Pyles:

Okay. Now, neither of us is an investment advisor and it's not our job to tell people what to do with their money. And as you stated earlier, we don't have a crystal ball for what's going to happen as this year goes along. But for listeners who want to get really serious about investing in 2024, what should they be thinking about?

Alana Benson:

The biggest thing, honestly, is just to start. So if you haven't been able to invest because you haven't had the funds, that's okay. But maybe focus on increasing your income in 2024, either by looking at new jobs that will pay you more or by starting a side hustle. I think a lot of people try to make space in a really small budget for investing by cutting out things like streaming services or coffee. But in reality, that's just not going to give you enough for retirement. I know for me personally, I used to work in restaurants, I never had any money left over at the end of the month. And the only way that I could start investing was by getting a different job that allowed me some extra income and some flexibility there. So your best bet is to try to increase your income rather than decrease your budget.

Sean Pyles:

Right. The more money you have, the more you're able to invest with it while also covering housing and groceries, all that.

Alana Benson:

Absolutely.

Sean Pyles:

Okay. Well, Alana, any other words of wisdom for our listeners hoping to make the most of their investments in 2024?

Alana Benson:

It's very cliche obviously, but stay calm and carry on. Really, I know it's scary and unpredictable, but investing can be one of the best ways to build wealth, especially over the long term. If you're trying to time the market, it's extremely likely you'll miss out. So case in point, toward the end of 2023, the S&P 500 was up 14%, but that was mostly attributed to just eight days out of the whole year. So if you missed those eight days, you didn't see the growth investing in the S&P that it offered. This kind of thing happens all the time. So the way to actually gain from the market realistically is to stay invested over a long period of time so you can get those little pockets of growth. And if you're nervous about investing, again, check out those high yield savings accounts. Those have far less risk, but it's a good way to experience getting some interest in your pocket, especially now that rates are so high.

Sean Pyles:

All right, well Alana, thank you so much for helping us out today.

Alana Benson:

Yeah, you're very welcome. What's coming up next week in the series?

Sean Pyles:

Well, next time as we look at your money in 2024, we're going to talk about how to manage credit and debt responsibly.

Lauren Schwahn:

We can't undo our spending, unfortunately. So the best thing to do is just make a plan for managing it going forward, and that can take some of the stress out of it.

Sean Pyles:

For now, that's all we have for this episode. If you have a money question of your own, turn to the Nerds and call or text us your questions at (901)730-6373. That's 901-730-NERD. You can also email us at [email protected]. Also visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you're getting this podcast.

Alana Benson:

This episode was produced by Tess Vigeland and me, Alana Benson. Sean helped with editing. Chris Davis helped with fact checking. Kaely Monahan mixed our audio. And a big thank you to NerdWallet's editors for all their help.

Sean Pyles:

And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Alana Benson: