The Importance of Investing in 2024

Settling into the new year is the optimal time to evaluate your financial goals. Defying earlier bleak predictions, the U.S. economy ended 2023 on a high note. The rise in consumer spending, a strong labor market, and increased company profits helped prop up the U.S. economy in 2023.

Yet, the economic picture in 2024 may not be so rosy. A potential recession, rising unemployment, a slower housing market, and inflation highlight the importance of investing in the new year. 

2023, with all its challenges, still ended with market highs

At the start of 2023, the economic landscape was riddled with uncertainty. Most economists expected that higher interest rates would lead to a recession. A recession could lead to big job losses. 

Rising prices pecked away at consumer wallets. Credit card debt reached $1.079 trillion by the third quarter of 2023, representing a jump of nearly 17% from the third quarter of 2022. Student loan borrowers, who paused payments for three years, had to begin repaying debt in October.

Despite these challenges, the U.S. economic landscape remained resilient heading into 2024. Consumer sentiment remained strong, the labor market continued to grow, and the recession never quite materialized.

On the investment front, 2023 was a banner year for the stock market. While the market experienced fluctuations, the S&P 500 gained 24% and the NASDAQ rose 44% by the end of 2023. Bonds ended up essentially flat on the year, serving its function as portfolio diversifiers. Even the tried-and-true savings account delivered a nice return thanks to rising interest rates. At the end of the day, investors with portfolios diversified across stocks, bonds, and other assets had a smoother ride.

In 2023, investors with the composure to endure months of pandemic uncertainty by staying invested were ultimately rewarded. Doing so was undoubtedly made easier with a sound financial plan, the right investment tools, an understanding of financial market history, and a cushion of savings. While plans are easy to make in good times when markets are rising, they become necessary when times are tough. This is one of the most important jobs of an investor.

Should you invest in 2024?

While 2023 ended on a high note, the economic conditions are mixed as we settle into 2024. Whether the Federal Reserve’s rate hikes can keep a recession at bay remains to be seen. The continued drop in the inflation rate may be more muted in 2024. Consumer spending may slow slightly thanks to rising household debt and the restarting of student loan repayments.

Investing your money is a crucial step to help with building wealth and protecting your finances from economic uncertainty. Your money can grow when you invest. Examples include buying a stock that grows and pays dividends or a bond that pays interest. You can also invest in real estate to capitalize on the lack of housing availability. Even if you place your money in a high-yield savings account, your balance can grow quickly with compound interest.

Whether you want to put money aside to buy a house or build an emergency fund, investing gives you the tools to meet your financial goals. 

In 2024, as always, an appropriate mix of investments is key

Diversification gives your portfolio a good balance between growth and risk. Asset classes, such as stocks, bonds, commodities, and cash, perform differently under market and economic conditions. Building your portfolio with a mix of different assets can protect your investments when the market and interest rates fluctuate. You can buy mutual funds or exchange-traded funds that pool investor money in larger portfolios.

Staying broadly diversified in your portfolio can help you weather uncertain market conditions. A sound investment mix can protect against market swings that may affect certain types of investments more than others. 

Choosing the appropriate mix of investments depends largely on the financial goals you want to achieve and your risk appetite. Stocks rallied in the past year on the back of excitement about artificial intelligence, even though Wall Street analysts had predicted a rough year for stocks. Given how tough it is to figure out where the market will go, spreading your investments around can provide a cushion.

Figuring out that mix can be difficult. Whether you are a new or seasoned investor, a managed account guided by professionals can provide a suitable investment portfolio that fits your needs. 

Don’t forget about using tax-advantaged accounts to grow investments. Setting aside funds for retirement provides you with a level of security for the future. When you contribute to your company’s 401(k) plan or an individual retirement account (IRA) now, your investment can grow over time. If your employer also matches your 401(k) contributions, it’s like free money.  

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PRO TIP! MoneyLion offers a fully managed portfolio that does not require management fees or minimums.

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Make 2024 the Year You Invest in Your Future

It is never too late to start investing. Even if you haven’t saved much, you can start by investing any amount of money. Many accounts have low investment minimums to start growing your nest egg. Although the market is unpredictable, the best approach is to stay patient and spread your hard-earned money around a mix of investments. Either way, the path to reaching your financial goals starts with investing your money. 

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