In this article, we discuss the 12 best tech stocks for long term investment. If you want to read about some more tech stocks for long term investment, go directly to 5 Best Tech Stocks For Long Term Investment.
In no era of human history have business and technology been so inextricably linked as they are in the present times. The significance of this can be gauged from a recent report that outlines the six trending industries in 2022. All of these overlap with the technology space. The industries include space tech, bio tech, neuro tech, robot tech, climate tech, and energy tech. These trends were witnessed despite a broad macro slowdown at the market which favored value stocks as investors reevaluate their risk profiles in light of recession fears.
According to analysts, the tech industry remains a robust choice for business growth and career advancement in 2022. As per a recent report, the information technology market grew from $8,384.32 billion in 2021 to $9,358.51 billion in 2022 at a compound annual growth rate of 11.6%. This growth came despite the pandemic, the Russia Ukraine war, and economic uncertainties. Looking forward into 2023, these growth trends are likely to accelerate as the economy recovers from a tumultuous 2022.
Investors should monitor long-term trends in the tech space, like the optimizing of IT systems for greater reliability, maintaining the value integrity of production AI systems and scaling vertical offerings, as well as the accelerating strategies to tap new virtual markets. Digital immune systems, applied observability, AI trust, risk and security management, industry clouds platform, platform engineering, wireless value realization, super apps, adaptive AI, metaverse, and sustainable technology are all also sectors investors should keep a close eye on.
Some of the top stocks in the tech sector for the long term include Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB). Analysts have urged leading technology providers to play a top role in helping enterprises use innovative technologies to slide through the current storms of disruption. The use of tech as a safe haven in times of recession, especially in the services sector, is also likely to rise in the coming years.
Source:Pixabay
Our Methodology
The companies that have long-term growth catalysts and operate in the tech sector were selected for the list. Special importance was assigned to outlining the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Best Tech Stocks For Long Term Investment
12. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) provides integrated solutions and services worldwide. On December 13, the firm announced that it had signed a deal with Rapidus to work on developing the breakthrough 2 nanometer node technology of the former for implementation in Japan by the latter. The US government plans to invest hundreds of billions in chip firms over the next few years to shore up chip manufacturing in the country. As the demand for electronics and electric vehicles rises, so will the demand for chips. IBM can jump on this growth curve by investments in the chip space.
On October 18, BofA analyst Wamsi Mohan maintained a Buy rating on International Business Machines Corporation (NYSE:IBM) stock and lowered the price target to $145 from $155, noting that it has been estimated that about 80% of the software portfolio is non-transactional contracts linked to mission-critical projects.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in International Business Machines Corporation (NYSE:IBM) with 4.3 million shares worth more than $515.8 million.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), International Business Machines Corporation (NYSE:IBM) is one of the best tech stocks for long term investment.
In its Q4 2021 investor letter, St. James Investment Company, an asset management firm, highlighted a few stocks and International Business Machines Corporation (NYSE:IBM) was one of them. Here is what the fund said:
“International Business Machines Corporation (NYSE:IBM) was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department in the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful IBM was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of IBM salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (read more)
Intel Corporation (NASDAQ:INTC) designs, manufactures and sells computer products and technologies worldwide. On November 18, Intel revealed that it has introduced its real-time DeepFake detector, FakeCatcher. This Deep Fake detector analyzes the blood flow in the video pixels to return results in milliseconds with an accuracy of 96%. The product is just one example of the growth path that the firm has in different sectors, like video editing and news dissemination, as the demand for powerful chips rises. The company, one of the leading US-based plays in the semi space, is also a reliable dividend player for the long term.
On October 31, Citi analyst Christopher Danely maintained a Neutral rating on Intel Corporation (NASDAQ:INTC) stock and lowered the price target to $27 from $30, noting that the company reported mixed results and guided well below consensus driven by the PC downturn.
At the end of the third quarter of 2022, 69 hedge funds in the database of Insider Monkey held stakes worth $1.9 billion in Intel Corporation (NASDAQ:INTC), compared to 65 in the preceding quarter worth $2.5 billion.
In its Q3 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Intel Corporation (NASDAQ:INTC) was one of them. Here is what the fund said:
“Also on the detractor side, Intel Corporation (NASDAQ:INTC) delivered a disappointing revenue miss and lowered full-year revenue and earnings guidance as COVID-19-driven demand for PCs abated (where Intel enjoys half its sales) and a delay in its flagship Sapphire Rapids CPU hurt its data center business. Despite these issues, we still believe Intel is an economically sensitive turnaround story with substantial upside.”
Micron Technology, Inc. (NASDAQ:MU) designs, manufactures and sells memory and storage products worldwide. On December 5, Micron Technology revealed that its mobile memory chip, low-power double data rate 5X (LPDDR5X), is gaining market traction with the validation of its mobile memory for Qualcomm Technologies’ latest mobile platform for flagship smartphones. The smartphone market is one of the biggest businesses in the world. Billions of people own smartphones and are increasingly reliant on these machines for many basic tasks. Micron, whose chips power these phones, has a steady avenue of growth in the smartphone space for the long-term.
On October 7, Fargo analyst Aaron Rakers maintained an Overweight rating on Micron Technology, Inc. (NASDAQ:MU) stock and lowered the price target to $70 from $75, noting that it won’t be surprising to see shares trading lower ahead of the upcoming first-quarter earnings release.
At the end of the third quarter of 2022, 74 hedge funds in the database of Insider Monkey held stakes worth $2.5 billion in Micron Technology, Inc. (NASDAQ:MU), compared to 69 in the preceding quarter worth $2.2 billion.
In its Q2 2022 investor letter, Meridian Funds, an asset management firm, highlighted a few stocks and Micron Technology, Inc. (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron Technology, Inc. (NASDAQ:MU) is a leader in the production of DRAM and NAND memory. We invested in the stock in the third quarter of 2019 during a cyclical downturn in the memory industry. Our rationale was that, while the memory industry is cyclical, we believed there are strong secular drivers in place that will lead to higher peaks and long-term growth. Our secular thesis is based on our conviction that the quest for ever-increasing compute speeds will increasingly rely on memory to solve bottlenecks and that increased memory content in nearly everything from mobile phones to automobiles will drive demand. Micron’s stock traded lower during the quarter due to macroeconomic concerns that led to lower earnings expectations. We increased our stake in the company, as we believe our secular thesis remains intact. We wanted to take advantage of what we view as temporary cyclical concerns that caused the stock to trade at less than 10x reasonable trough earnings per share (EPS) estimates and less than 7x recent peak EPS.”
Tesla, Inc. (NASDAQ:TSLA) designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems. On September 30, Tesla launched the prototype of its humanoid robot named Dubbed Optimus. This launch has set a mark on reshaping the future of physical work using artificial intelligence. The company said that the robot is running on its Self-Driving computer. Over the years, the firm has distinguished itself in the electric vehicle space through the use of cutting-edge software that competitors are often lacking. The foray into robotics underscores the innovation-driven values of the firm which have helped it build such a strong profile in the EV space.
On December 13, Goldman Sachs analyst Mark Delaney maintained a Buy rating on Tesla, Inc. (NASDAQ:TSLA) stock and lowered the price target to $235 from $305, noting that it is believed that if Tesla can demonstrate that its demand levers and the Inflation Reduction Act contribution can help drive strong growth and margins in the coming quarters, then an upside case could be visible for the stock to trade to about $300.
At the end of the third quarter of 2022, 88 hedge funds in the database of Insider Monkey held stakes worth $7.4 billion in Tesla, Inc. (NASDAQ:TSLA), compared to 73 in the preceding quarter worth $7.2 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Tesla, Inc. (NASDAQ:TSLA) was one of them. Here is what the fund said:
“In 2014, before we began to invest in Tesla (NASDAQ:TSLA), I called Roger to ask whether he thought Elon Musk’s electric car business would succeed. I did not believe that Roger, an owner of dealerships that sell cars powered by internal combustion engines (ICE) would likely have a favorable opinion of Tesla’s prospects. That was principally for two reasons:
First, automobile manufacturing and distribution is unusually complicated, capital intensive, and highly regulated, which makes profitability problematic;
second, cars with ICE motors require extensive annual maintenance, and dealer services revenues, not profits from automobile sales, are the most important contributor to profits of perpetual licensed ICE car dealerships.
Penske Automotive Group is principally an ICE car dealer. Since electric cars are powered by batteries and need little service, franchised dealerships are incented to sell ICE, not EV automobiles. Further, Roger had been a long-term director of General Motors. General Motors’ ICE automobile business would be disrupted if Tesla were successful. (click here to read more…)
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, computing and networking solutions. On November 16, NVIDIA made a multi-year partnership with Microsoft to build a supercomputer powered by Microsoft Azure’s advanced supercomputing infrastructure. This would be one of the most powerful cloud-based artificial intelligence supercomputers in the world. NVIDIA chips are considered some of the most advanced across the world and are especially popular among gaming enthusiasts. This niche has helped the company establish a stable foundation which it is now using to expand into new spaces in the tech sector.
On December 12, Cowen analyst Matthew Ramsay maintained an Outperform rating on NVIDIA Corporation (NASDAQ:NVDA) stock and raised the price target to $220 from $200, noting that the company is believed to be the leader in accelerated computing, and maintains wide and deep technological moats.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in NVIDIA Corporation (NASDAQ:NVDA) with 19.3 million shares worth more than $2.3 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them was large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…(read more)
ServiceNow, Inc. (NYSE:NOW) provides enterprise cloud computing solutions that define, structure, consolidate, manage, and automate services for enterprises worldwide. On October 5, ServiceNow unveiled that it would acquire Era Software, an observability and log management innovator. The company said that customers will be able to gather actionable insights that deliver value across the business, within a single solution purpose-built for the era of digital business. The purchase highlights the growth momentum in the software industry that has showed it can handle macro pressures this year. As more businesses go digital, the firm can expect to grow significantly in the coming years.
On October 27, Truist analyst Joel Fishbein maintained a Buy rating on ServiceNow, Inc. (NYSE:NOW) stock and lowered the price target to $525 from $550, noting that the company reported a strong quarter of constant-currency growth, but currency headwinds continue to be a drag on the top line performance and are starting to impact the bottom line as well.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in ServiceNow, Inc. (NYSE:NOW) with 1.7 million shares worth more than $639.7 million.
In its Q2 2022 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and ServiceNow, Inc. (NYSE:NOW) was one of them. Here is what the fund said:
“ServiceNow, Inc. (NYSE:NOW) is an enterprise software company that helps its corporate customers integrate all of their various software products into a unified platform. Their products are a key element in driving the digital transformation nearly every large company is undergoing. At the recent JP Morgan investor day, CEO Jamie Dimon explained that while the company could reduce expenses if needed should the economy slow, their spending on digital transformation would continue as this spending was critical to the company managing costs and maximizing revenue over time. As an example of this type of spending, Dimon specifically pointed to ServiceNow, calling out that the company’s products now oversaw the single largest collection of JP Morgan data and highlighted that working with them had saved JP Morgan $50 million over the past few years. (click here to read more…)
Salesforce, Inc. (NYSE:CRM) provides customer relationship management technology that brings companies and customers together worldwide. On September 21, Salesforce revealed its real-time platform Genie, a hyper-scale real-time data platform that powers the entire Salesforce Customer 360 platform. With this platform, every company can turn data into customer magic, delivering seamless, highly personalized experiences across sales, service, marketing, and commerce. The revelation is the latest example of the leading cloud services provided by the firm to businesses across the world. The firm is firmly committed to a strategy focused on delivering growth while continuing to expand operating margins.
On December 5, Credit Suisse analyst Phil Winslow maintained an Outperform rating on Salesforce.com, inc. (NYSE:CRM) stock and lowered the price target to $225 from $250, noting that the company reported solid third-quarter results on the income statement.
At the end of the third quarter of 2022, 117 hedge funds in the database of Insider Monkey held stakes worth $8.2 billion in Salesforce, Inc. (NYSE:CRM), compared to 116 in the preceding quarter worth $7.9 billion.
Along with Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), Salesforce, Inc. (NYSE:CRM) is one of the best tech stocks for long term investment.
In its Q3 2022 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Salesforce, Inc. (NYSE:CRM) was one of them. Here is what the fund said:
“Salesforce, Inc. (NYSE:CRM) has become a dominant global player in sales, customer service, commerce and marketing software over the past 20 years. The company earns 80% gross margins and grows 20% organically. Plus, virtually all of its revenue is recurring. We see Salesforce as a great business that we’ve admired from afar for a long time. More recently, the organization has made some changes at the top that prompted us to take a closer look at the stock. New CEO Bret Taylor and CFO Amy Weaver are bringing a culture of financial discipline. We believe this renewed focus on profitability and capital return, combined with Salesforce’s strong underlying business characteristics, will yield strong results. The current valuation of 3.9x next year’s revenues represents a significant discount compared to publicly traded peers and recent private market values in the software space that have similar growth profiles. This discount is an opportunity to invest in a great business at a good value.”
PayPal Holdings, Inc. (NASDAQ:PYPL) operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. The firm has shown over the past few months that the free cash flows it generates are more than capable of withstanding recession pressures. This makes the stock ideal for long-term holding, as it has several avenues for growth in the digital space, which, when combined with recession resilience, make for a very balanced growth and value profile.
On December 12, Barclays analyst Ramsey El-Assal maintained an Overweight rating on PayPal Holdings, Inc. (NASDAQ:PYPL) stock and raised the price target to $108 from $100.
Among the hedge funds being tracked by Insider Monkey, Camas, Washington-based investment firm Fisher Asset Management is a leading shareholder in PayPal Holdings, Inc. (NASDAQ:PYPL) with 17.7 million shares worth more than $1.5 billion.
In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“This quarter, we bought shares in PayPal (NASDAQ:PYPL), the payments platform. PayPal has been one of the more high-profile victims of the market’s brutal ruthlessness over the past few months, and the stock fell by over two-thirds between its peak in July to the beginning of March this year. As we progressed PayPal through the Mayar Checklist Process, we identified a business with a leadership position in a structurally growing market.
The company benefits from certain network effects and faces several competitive threats at the same time. As the business profited from the move to online retail during the pandemic, as well as from the stimulus cheques handed out in the US, the stock price soared to absurd levels. As so often happens, however, the market had overcorrected by February and this quarter was offering prospective shareholders prices that assumed essentially zero growth in the business. When life gives you irrational sellers, make lemonade!”
Apple Inc. (NASDAQ:AAPL) designs, manufactures and markets smartphones, personal computers, tablets, wearables, and accessories. Apple is one of the biggest companies in the world and has built a brand that billions of people around the world own and know about. The firm has been able to grow revenues even in a macro slowdown and has the confidence of legendary value investors like Warren Buffett. The large correction in the stock price due to recession fears has also made the risk/reward profile of the shares more balanced in the past few months, and as the market recovers, the shares seem primed for an upside. The firm has a forward PE ratio of around 21x and a return on capital employed of around 100%. The shares can return more than 10% to investors annually over the long-term. The history of the firm in the stock market backs these predictions.
On November 8, UBS analyst David Vogt maintained a Buy rating on Apple Inc. (NASDAQ:AAPL) stock and lowered the price target to $180 from $185, noting that due to COVID-related complications, delivery dates are seen extending beyond Black Friday, though the impact is still estimated to be in the low single digits.
At the end of the third quarter of 2022, 140 hedge funds in the database of Insider Monkey held stakes worth $144 billion in Apple Inc. (NASDAQ:AAPL), compared to 128 in the previous quarter worth $143 billion.
In its Q2 2022 investor letter, Alger Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple Inc.(NASDAQ:AAPL) is a leading technology provider in telecommunications. computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. The engagement is fostering the growing purchase of high-margin services like music, apps, and apple pay. Apple’s shares detracted from performance as management lowered its guidance for the second quarter due to headwinds from the war in Ukraine, adverse foreign currency shifts, and dampened consumer demand associated with the coronavirus in China. Additionally, many investors were concerned that lockdowns implemented to curtail the spread of COVID-19 would impact the production of apple products, however, the manufacturing facilities have resumed activity.”
Mastercard Incorporated (NYSE:MA) is a technology company that provides transaction processing and other payment-related products and services. On December 7, Marqeta, a card issuing platform, announced that it has integrated with Mastercard’s Track Instant Pay, a virtual card solution which enables instant payment of supplier invoices via machine learning and a straight-through process. The integration highlights the importance that the company places on innovation while continuing to maintain a solid business profile which has helped it pay a growing dividend to shareholders for the past eleven years.
On November 1, Mizuho analyst Dan Dolev maintained a Buy rating on Mastercard Incorporated (NYSE:MA) stock and lowered the price target to $380 from $385, noting that the 2022 estimates were raised but outer-year expectations were trimmed down.
At the end of the third quarter of 2022, 137 hedge funds in the database of Insider Monkey held stakes worth $13.9 billion in Mastercard Incorporated (NYSE:MA), compared to 137 in the previous quarter worth $14.99 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Mastercard Incorporated (NYSE:MA) was one of them. Here is what the fund said:
“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Mastercard Incorporated (NYSE:MA) added the most value. These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”
Visa Inc. (NYSE:V) operates as a payments technology company worldwide. On October 20, Current, a leading US financial technology platform, announced that it has migrated to the Visa DPS Forward Platform, a digital issuer processing platform built with REST APIs and designed to integrate with modern, digital banking cores to create unique card programs and payment solutions, with seamless migration of over four million accounts. The migration underscores the relevance of the firm, one of the leading payments giants, to new businesses in an era marked with speculation around crypto and other digital assets. The firm is also a reliable dividend player with over fourteen years of history in the space.
On December 2, Wells Fargo analyst Donald Fandetti maintained an Overweight rating on Visa Inc. (NYSE:V) stock and raised the price target to $250 from $225, noting that it is believed that the company is becoming even more entrenched in the global money movement ecosystem with their new products, making it even more difficult to disintermediate them in any meaningful way.
At the end of the third quarter of 2022, 165 hedge funds in the database of Insider Monkey held stakes worth $22.5 billion in Visa Inc. (NYSE:V), compared to 166 in the preceding quarter worth $24 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Visa Inc. (NYSE:V) was one of them. Here is what the fund said:
“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Visa, Inc. (NYSE:V). These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”
Microsoft Corporation (NASDAQ:MSFT) develops, licenses, and supports software, services, devices, and solutions worldwide. On December 12, Microsoft signed a ten-year commercial deal with the London Stock Exchange Group to migrate the exchange data platform into the cloud. As part of the deal, the tech company will enable the digital transformation of LSEG’s technology infrastructure and Refinitiv platforms onto the Microsoft Cloud and in exchange, it will acquire a 4% equity stake in the financial firm, which owns the London Stock Exchange.
On October 26, RBC Capital analyst Rishi Jaluria maintained an Outperform rating on Microsoft Corporation (NASDAQ:MSFT) stock and lowered the price target to $310 from $380, noting that several near-term headwinds are now expected to pressure operating margins in financial year 2023, which Microsoft management now expects to contract by a point.
At the end of the third quarter of 2022, 269 hedge funds in the database of Insider Monkey held stakes worth $61.2 billion in Microsoft Corporation (NASDAQ:MSFT), compared to 258 in the previous quarter worth $56 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“Shares of Microsoft Corporation (NASDAQ:MSFT), a leading global provider of software solutions, declined 16.6% in the quarter along with the broader software group as well as due to growing concerns of a potential macro-driven slowdown. This is despite the company posting strong quarterly financial results and successfully absorbing headwinds from the war in Ukraine. The company had 21% revenue growth, 23% operating income growth, and 35% growth in Microsoft Cloud (all year-over-year in constant currency), which now represents 47% of total revenues.
Investment Statistics (10 Investment Statistics Investors Need To Know) – Forbes
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April 25, 2024
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Understanding investment markets can be difficult, as there’s so much information to sort through. Fortunately, you don’t need to understand every single concept or piece of data to have success as an investor.
A few important, simple and often surprising investment statistics can guide your choices and make you a better investor in the long term. Here are a few worth considering.
1. The Annual Return of the S&P 500 (10% Per Year)
The stock market has been a consistent way to build wealth over the past 100 years. Likewise, from April 1, 1936 through March 31, 2024, the S&P 500 Index–a widely followed barometer for the broad U.S. stock market–averaged an annual return of 10.75%.
To put that return into perspective, if you earn 10% per year on your savings, and your gains compound quarterly, you’ll double your money roughly every seven years. Put $20,000 in an S&P 500 fund today, and if you earn the historical return of 10% per year, you’ll have $40,000 in about seven years.
Of course, the stock market is unpredictable and goes through swings. Your portfolio might go down some years and up by more than 10% in others. The key takeaway is that the stock market posts a substantial average annual return over time.
2. The Average Annual Inflation Rate (3.8% Per Year)
Inflation is another reason why it’s essential to invest. When prices go up, the purchasing power of each of your dollars goes down. On average, U.S. inflation has been 3.8% percent per year from 1960 to 2022. If you aren’t earning at least that much on your money, it’s losing value. Your balance might stay the same in a bank account, but it buys less and less, making you poorer.
Investments like stocks historically outperform inflation. By investing some of your money in stocks and stock funds, your savings and spending power can keep up with rising prices.
3. The Number of Active Day Traders Who Lose Money (80%)
Using an index fund, you can often match the performance of the entire S&P 500 and various major stock markets. This is different from buying and selling–or trading–individual stocks. Trading individual stocks can be exciting when it succeeds, leading sometimes to sharp short-term gains, but profiting consistently is very hard.
In fact, 75% of day traders trying to invest professionally quit within two years, and 80% of their trades are unprofitable, according to a University of Berkeley study. And individual stock day traders working through a taxable account often generate short-term capital gains, which are taxed at higher ordinary income rates than long-term capital gains. Day traders can also trigger a lot of investment fees. Also, as a day trader you’re competing against the best professional investors on Wall Street, many backed by big research teams.
Most regular investors are better off using mutual funds and exchange-traded funds, or ETFs, that aim to match the stock market instead. It’s less exciting but still lucrative in the long term.
4. The Cost of an Index Fund vs. an Active Fund for a $1 Million Portfolio ($1,200 vs. $6,000 Per Year)
If you’re trying to pick an investment fund, consider the cost. An index fund keeps costs low by simply trying to mimic the performance of a specific segment of the market. The S&P 500 is one. It consists of 500 of the largest companies listed on U.S. stock exchanges. The Nasdaq 100 consists of stocks issued by 100 of the largest nonfinancial businesses listed on the Nasdaq stock exchange.
Many index funds track each of those groups. Generally, their costs are kept low because they don’t have to pay for lots of investors, analysts and software wizards to find stocks. In contrast, actively managed funds do pay for talented people who can pick stocks that outperform. Those costs get passed on to shareholders like you.
Index funds, on average, charge 0.12% per year versus the 0.60% charged by active investment funds. That means on a $1 million portfolio, you’d pay $1,200 per year for an index fund versus $6,000 a year for an active fund.
Despite charging much more, 79% of active funds, trying to earn higher returns, underperformed the S&P 500 in 2021. Often, you’re paying extra fees for actively managed funds without getting any additional return in exchange.
5. The Average Length of a Bear Market (14 Months)
One drawback to investing is that your returns are not guaranteed. In some years you’ll earn a lot. In others, your portfolio could lose money. It’s not fun to lose money, but during this stretch, remind yourself that the market will turn around eventually.
The average historical bear market, a period when stocks are losing value, has lasted 14 months. On the other hand, the average historical bull market, when stocks go up in value, has lasted five years.
The market will go through cycles of gains and losses. Remember that the positive stretches last longer than the negative ones.
6. The Number of ‘Best Investing Days’ That Can Turn a Positive Portfolio Negative If Missed (20 Days Over Two Decades)
When the market crashes, you might feel tempted to cash out and wait until things start picking up again. This is one of the most expensive mistakes investors make.
Why is that? Because so much of the stock market’s long-term returns come from single-day gains. The market sometimes shoots up by 5%, 7% or even 10% in a single day. Those days are impossible to predict. And they often occur at the start of a rally.
Individual retail investors often miss those explosive, unexpected upturns because they cashed out or moved to bonds amid the market’s earlier downturn.
A JPMorgan report found that if investors missed the top 10 best days of investing over a two-decade period from January 1999 to December 2018, it cut their portfolio return in half. If investors missed the top 20 best investing days, their return turned negative, meaning that they lost money over that two-decade period. Don’t try to time the market. Stay invested for the long term for the best results.
7. The Monthly Investment Needed to Reach $1 Million If You Start at Age 25 vs. Age 45 ($350 vs. $1,650)
The earlier you start investing, the more time you have to build wealth. This makes it easier to hit your long-term financial goals.
Let’s say you want $1 million in your nest egg for retirement at age 67. You expect to earn 7% a year, a reasonable return for a portfolio of stocks and bonds. If you start at age 25, you would need to save about $350 per month. If you start at age 45, you must save around $1,650 a month.
If you’re still early in your career, consider ways to save more money. Even a little extra today will make reaching your future financial goals easier. Don’t get discouraged if you are later in your career. You may wish you had started earlier, but anything you put aside now will help you once you retire. As the saying goes, perhaps the best time to start was years ago, but the second-best is now.
8. The Number of People With a Workplace Retirement Plan (44%)
A workplace retirement plan, like a 401(k), can help you invest. Those plans let you save money and defer yearly tax on growth in your investments inside your account. With a traditional 401(k), you also get a tax deduction for the money you kick into your account. In most cases, your employer also contributes to your account.
Only 44% of American workers have access to a workplace retirement plan. If you have one, study how it works to take full advantage.
The majority of workers, 56%, do not have a retirement plan at their job. Consider an individual retirement account, or IRA, if you are in that situation. It offers similar tax advantages for your retirement savings and investment goals.
9. The Expected Life Expectancy of Males and Females Turning 65 (82 and 85 Years)
The top reason most people invest is to save for retirement. And retirement might last a lot longer than you expect. The typical male turning 65 today is expected to live until 82, while females are expected to live until 85, according to the Social Security Administration.
That is a retirement lasting an average of nearly two decades. Some people will live even longer, reaching 90, 100 or even older. This is why saving and investing regularly is important—to build extra savings to fund your retirement lifestyle.
10. The Average Baby Boomer 401(k) Balance ($230,900)
Fidelity measured the average 401(k) balance by age of its customers. This can give you an idea of where your savings stack up against your peers:
Gen Z: $9,800
Millennials: $54,000
Gen X: $165,300
Baby Boomers: $230,900
This represents investments in a 401(k). People may have more money in an IRA or other investment account. Still, those figures show that the typical person does not retire with $1 million. Therefore, you shouldn’t feel behind if you’re just starting to save for retirement. Do what you can to beat these averages and grow your portfolio.
Hopefully, these statistics help shed some light on the importance of investing and investing wisely. Consider meeting with a financial advisor to discuss your portfolio for more advice.
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Deutsche Bank's Investment Bankers Step Up as Rate Boost Fades – Yahoo Canada Finance
Published
6 hours ago
on
April 25, 2024
By
(Bloomberg) — Deutsche Bank AG relied on its traders and investment bankers to make up for a slowdown in income from lending, as Chief Executive Officer Christian Sewing seeks to deliver on an ambitious revenue goal.
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Fixed income trading rose 7% in the first quarter, more than analysts had expected and better than most of the biggest US investment banks. Income from advising on deals and stock and bond sales jumped 54%.
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Revenue for the group rose about 1% as the prospect of falling interest rates hurt the corporate bank and the private bank that houses the retail business.
Sewing has vowed to improve profitability and lift revenue to €30 billion this year, a goal some analysts view with skepticism as the end of the rapid rate increases weighs on revenue from lending. In the role for six years, the CEO is cutting thousands of jobs in the back office to curb costs while building out the advisory business with last year’s purchase of Numis Corp. to boost fee income.
“We are very pleased” with the investment bank, Chief Financial Officer James von Moltke said in an interview with Bloomberg TV. The trends of the first quarter “have continued into April,” he said, including “a slower macro environment” that’s being offset by “momentum in credit” and emerging markets.
While traders and investment bankers did well, revenue at the corporate bank declined 5% on lower net interest income. Private bank revenue fell about 2%. Both units benefited when central banks raised interest rates over the past two years, allowing them to charge more for loans while still paying relatively little for deposits.
With inflation slowing and interest rates set to fall again, that effect is reversing, though markets have scaled back expectations for how quickly and how deep central banks are likely to cut. That’s lifted shares of Europe’s lenders recently, with Deutsche Bank gaining 25% this year.
“Deutsche Bank reported a reasonable set of results,” analysts Thomas Hallett and Andrew Stimpson at KBW wrote in a note. “The investment bank performed well while the corporate bank and asset management underperformed.”
–With assistance from Macarena Muñoz and Oliver Crook.
How Can I Invest in Eco-friendly Companies? – CB – CanadianBusiness.com
Published
10 hours ago
on
April 24, 2024
By
Welcome to CB’s personal-finance advice column, Make It Make Sense, where each month experts answer reader questions on complex investment and personal-finance topics and break them down in terms we can all understand. This month, Damir Alnsour, a lead advisor and portfolio manager at money-management platform Wealthsimple, tackles eco-friendly investments. Have a question about your finances? Send it to [email protected].
Q: It’s Earth Month! And… there’s a climate crisis. How can I invest in companies and portfolios funding causes I believe in?
Earth Day may have been introduced in 1970, but today it’s more relevant than ever: In a 2023 survey, 72 per cent of Canadians said they were worried about climate change. Along with carpooling, ditching single-use plastics and composting, you can celebrate Earth Month this year by greening your investment portfolio.
Green investing, or buying shares in projects, companies, or funds that are committed to environmental sustainability, is an excellent way to support projects and businesses that reflect your passions and lifestyle choices. It’s growing in favour among Canadian investors, but there are some considerations investors should be mindful of. Let’s review some green investing options and what to look out for.
Green Bonds
Green bonds are a fixed-income instrument where the proceeds are put toward climate-related purposes. In 2022, the Canadian government launched its first Green Bond Framework, which saw strong demand from domestic and global investors. This resulted in a record $11 billion green bonds being sold. One warning: Because it’s a smaller market, green bonds tend to be less liquid than many other investments.
It’s also important to note that a “green” designation can mean a lot of different things. And they’re not always all that environmentally-guided. Some companies use broad, vague terms to explain how the funds will be used, and they end up using the money they raised with the bond sale to pay for other corporate needs that aren’t necessarily eco-friendly. There’s also the practice of “greenwashing,” labelling investments as “green” for marketing campaigns without actually doing the hard work required to improve their environmental footprint.
To make things more challenging, funds and asset managers themselves can partake in greenwashing. Many funds that purport to be socially responsible still hold oil and gas stocks, just fewer of them than other funds. Or they own shares of the “least problematic” of the oil and gas companies, thereby touting emission reductions without clearly disclosing the extent of those improvements. As with any type of investing, it’s important to do your research and understand exactly what you’re investing in.
Socially Responsible Investing (SRI) and Impact Investing
SRI and impact investing portfolios hold a mix of stocks and bonds that are intended to put your money towards projects and companies that work to advance progressive social outcomes or address a social issue—i.e., investing in companies that don’t wreak havoc on society. They can include companies promoting sustainable growth, diverse workforces and equitable hiring practices.
The main difference between the two approaches is that SRI uses a measurable criteria to qualify or disqualify companies as socially responsible, while impact investing typically aims to help an enterprise produce some social or environmental benefit.
Some financial institutions use the two approaches to build well-diversified, low-cost, socially responsible portfolios that align with most clients’ environmental and societal preferences. That said, not all portfolios are constructed with the same care. As with evaluating green bonds, it’s important to remember that a company or fund having an SRI designation or saying it partakes in impact investing is subjective. There’s always a risk of not knowing exactly where and with whom the money is being invested.
All three of these options are good reminders that, even though you may feel helpless to enact environmental or social change in the face of larger systemic issues, your choices can still support the well-being of society and the planet. So, if you have extra funds this April (maybe from your tax return?), green or social investing are solid options. As long as you do thorough research and understand some of the limitations, you’re sure to find investments that are both good for the world and your finances.
