Where to put your money in 2024

ILLUSTRATION BY RACHEL REVILLA

MANILA, Philippines — In 2024, the conversation of where to put your money carries with it a lot more nuance than ever before. Markets and economies all over the world upended all forecasts in 2023. Will they do better in the coming year? Or will they all end up a dud? Are we finally going to see the recovery everyone has been waiting for, now no longer with bated breath? And in this scenario, where will each P10,000, P100,000, P1 million or P1 billion make the most return?

The usual answers are now based on a mixture of old-and-still-good models, but also some new ways of thinking that are responses to a world that is fast evolving.

That’s because the last three years wiped out some of what the world had known about investing but taken for granted, and the possibility that — as an article in The Economist says — the golden age of investing may be over.

Let’s unpack that briefly.

Flip through the Nov. 18 issue of The Economist and you will read that during the four decades that ended in 2021, a broad index of global funds earned an annualized real return of 7.4 percent, while global bonds annualized real returns were at 6.3 percent. That’s massive compared with zero in the preceding 80 years, the article, entitled “How The Young Should Invest,” sassily points out.

Goldilocks no more

These returns were brought about by globalization, very low inflation and a long decline in interest rates, and guess what? That’s all changing, the article says.

In 2024, we will see more proof of this. But instead of letting the pain of a dying golden investment age push everyone away from investing, the truth is, as the article again points out, the biggest mistake is to stop now when returns will be harder to come by. Cash is vulnerable to inflation and retirement will not wait for anyone.

So, where? Here are some ideas:

1. Bonds will have the best risk and return propositions in 2024

Noli de Pala, chief investment officer of Singapore-based TriLake Partners Pte. Ltd, formerly head of trust of various universal banks here in the Philippines, points out that if yields fall, prices will improve. If they don’t fall yet, we can enjoy the coupon. He likes medium-term duration as it provides well-compensated risk and prefers emerging market bonds issued in local currencies compared with developed market ones.

Anthony de Guzman, former Wall Street banker and cofounder of Accel Institute, a business education service provider, further points out that locking in rates now in two to five-year bonds, before the US Federal Reserve (Fed) cuts rates in 2024, will be a good strategy. Of course, that depends on your investment horizon.

Val Bagatsing, chair and CEO of Investment and Capital Corporation of the Philippines, says sovereign debt should be part of an inflation-hedged multi-asset portfolio in 2024 as the Philippines continues to struggle with food production and logistics issues, and as the world grapples with worsening geopolitical concerns.

2. Carefully selected value stocks are investment instruments that many experts add to their shopping list

Ruben Zamora, head of institutional sales at Metrobank, also picks bonds as the first asset of choice for a 2024 portfolio, but he points out that Metrobank is now more positive about risk assets, including equities. The shift may happen after the first three months.

“Look for well-run and well-managed companies with resilient earnings, especially those that have been through high-inflation environments in the past. These include banks, utilities, higher-paying dividends like those in the telco industry,” he tells me in an interview on ANC’s On The Money.

Mark Ilao, head of market education for GCash, believes the Philippine Stock Exchange is due for a recovery in 2024 and likes blue chips SM Investments Corp. and Ayala Corp., which usually lead the charge during a recovery year. Local equity index funds could be an alternative for those who don’t want to do their own stock picking, as well as global funds that have returned up to 30 percent in 2023.

Wall Street plays

TriLakes’ De Pala explains during our interview on ANC’s The Business Outlook that on the global front, some names among what everyone calls the “Magnificent 7” could still spew out around 70 percent or higher returns in 2024 similar to what they gave in 2023.

Companies like NVIDIA Corp., alongside TSMC and ASML, which produce semiconductor chips and software for those chips, respectively, are expected to do well, as well as others that will rise because of interest in artificial intelligence (AI).

De Pala says stock selection in the United States could be more rewarding than a broad beta play. He likes companies that have quality earnings and the Jamie Dimon-coined “fortress balance sheets.”

In a separate interview, de Pala says the financial sector would reap the benefits of a normalizing yield curve and the emergency funding windows of the Fed, but be wary of regional banks and their exposure to commercial real estate.

De Pala explains, “2024 could either be the second year of a new bull market or the tail end of the one that started in March 2009. Late stages are often marked by face-melting rallies led by a few names (happening). Early stages are usually led by financials and small caps (hasn’t happened).”

For those who want to diversify to other regions, India, Japan, Mexico and Asean 6 (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam) may give added returns. In terms of themes, robotics and infrastructure will benefit from supply chain realignments, while the continuing polarization of societies and regions that is creating an “angry society” theme means defense contractors, cybersecurity, and commodities will win.

3. The return of cryptocurrencies is making a big splash, as expected

PDAX figures as of Dec. 29 show that tokens like Solana’s 2023 return topped everything at 871 percent, avalanche at 268 percent, the graph at 240 percent, chainlink at 200 percent, bitcoin cash at 170 percent and bitcoin at 161.2 percent.

Luis Buenaventura, GCash Head of Crypto, says 2024 will be shaped by several divergent narratives. One, real-world assets like nation-state Treasury bonds have entered the crypto markets for the first time. The Philippines already has tokenized government bonds through PDAX and Bonds.ph. On the other hand, Buenaventura also says blockchain protocols are decentralizing AI generation and consumption.

In between those two extremes, games are making a comeback. There are new primary blockchains competing for the ethereum crown, and a groundbreaking Bitcoin Spot Exchange-Traded Fund is just around the corner.

For newcomers, Luis advises restricting investments to just the top three coins by market capitalization, namely bitcoin, ethereum, and binance coin.

No brainers

Depending on risk requirements and risk appetite, plus of course the amount of investible funds, investment horizon, and objectives, there may be other assets that could be used to enliven portfolios in 2024. This coming year will be beleaguered by so much risk and the possibility of lower returns. Real estate (not too liquid and now on the expensive side), real estate investment trusts, and different hard currencies should be considered.

But there are some basic no-brainers.

Take advantage of the 4 percent to 6 percent compounded returns and sometimes even higher offered by digital-only banks and some time-deposit products of traditional banks. If you haven’t yet, you should — as soon as possible. We have never had deposit rates this sweet, but do transact only with the six digital banks licensed by the Bangko Sentral ng Pilipinas.

Start young to give the power of compounding time to work. Let the snowball grow over time, and you will be surprised at just how little you need to set aside to have a reasonable amount of savings over time. Be mindful of your spending, but don’t be too stingy that you become a fun-less excuse for a human. Diversify. Timing the market is for market professionals only! Getting bit by the YOLO (you only live once) philosophy in your relationships is more forgivable than in investing.

And lastly, in the words of TriLakes Noli de Pala, never forget this piece of wisdom: Inflation will spike in each city that Taylor Swift plays on the Eras Tour.

Happy New Year everyone and may the gods be ever in your favor.