Experienced investors frequently approach the markets with a long-term perspective and use volatility in the short- and medium-term to invest in the themes they predict will succeed over the long run. Even though it can be challenging to spot these trends, ignoring the noise can help you see what’s next, which could lead to huge rewards.

As we ring in the new year, let’s look at five of the most popular investment trends at the moment, focusing on several themes with strong growth prospects through 2023 and beyond.

1. Computerized intelligence

Artificial intelligence (AI), which was previously just imaginable, has gained prominence in society as a result of the technological revolution. Because AI is transforming so many facets of our life, it has the potential to dominate the economy for the next hundred years.

By 2024, according to analysts at market intelligence company International Data Corporation (IDC), the global AI market could generate $500 billion in revenue, representing a five-year compound annual growth rate of 17.5 percent.

AI’s primary goal is to more accurately and quickly mimic human intelligence. With its uses and applications affecting almost every industry, AI is gaining strength as computers and other technologies become more intelligent.

Consider ChatGPT, a sophisticated chatbot that can quickly write complex human-like prose, or DALL-E 2, an AI system that employs machine learning techniques to create realistic visuals and art from the text.

The technology is already prevalent, whether it is in self-driving cars, Robo-advisors, or drug discovery studies.

Exchange-traded funds (ETFs) provide a practical and convenient way for the majority of ordinary investors to participate in AI stocks. Consider these three: ARK Autonomous Technology & Robotics ETF (ARKQ), ROBO Global Robotics and Automation Index ETF, and Global X Robotics & Artificial Intelligence ETF (BOTZ) (ROBO).

2. rising rates of interest

The Federal Reserve has raised interest rates to their highest level since 2007 to reduce inflation, and it has hinted that further rate increases may be forthcoming.

According to experience, certain economic sectors do well when interest rates are rising. When it comes to financial institutions, for instance, even a minor increase in interest rates might result in billions of dollars in more revenue from interest-bearing loans.

Cash-rich businesses with little debt are another category that frequently reaps the rewards. These businesses get larger yields on their cash reserves when yields climb. The S&P 500’s a technology and healthcare companies frequently have the largest cash reserves because many of them save money for strategic buyouts and other expansion opportunities. But in 2022, tech stocks suffered greatly as even the biggest brands experienced a dramatic decline in share prices as the Fed tightened monetary policy.

Investors interested in these industries may want to think about investing in ETFs like the Financial Select Sector SPDR Fund (XLF), Health Care Select Sector SPDR Fund (XLV), or Technology Select Sector SPDR Fund (XLK).

Bond market investment returns and interest rates have a strong relationship that extends beyond equities. Investors can benefit from this trend by employing a variety of investment methods, such as purchasing short-term fixed-income instruments or reinvesting coupons from long-term bonds.

3 the metaverse

The internet will eventually feature virtual worlds where people may communicate without being physically present. Additionally, these virtual worlds may represent the next significant investment opportunity, according to analysts’ predictions.

Thanks to improvements in computing power, internet speed, and other technologies, IT firms are creating ecosystems where people may shop, play, exercise, learn, and engage in the majority of daily activities online. For instance, Meta (FB) intends to invest billions in the creation of the metaverse.

As interest from businesses looking to profit from this trend increases, so do the audiences for these virtual worlds. For instance, the art gallery Sotheby’s runs a virtual gallery in the 3D virtual environment Decentraland. Similarly to this, Nike (NKE) increased its online presence by purchasing virtual shoe retailer RTFKT.

Similarly, Microsoft (MSFT) has started the process of buying Activision Blizzard for $68.7 billion, making it the largest gaming deal in history and a huge wager on the growth of the metaverse. Governments all over the world have given the merger a lot of regulatory attention.

Analysts identify NVIDIA (NVDA), a semiconductor business that powers computer graphics, as one possible beneficiary of the expansion of the metaverse, among other investment options. Fastly (FSLY), a leading provider of cloud technology, Autodesk (ADSK), Unity Software (U), software companies that enable architects and designers to generate 3D models, and others are also well-known players in the market.

Roundhill Ball Metaverse ETF (METV) invests in a variety of metaverse-related businesses for individuals seeking broader exposure.

4. Protection from inflation

The U.S. Labor Department’s numbers show that inflation is still greater than it has been since the early 1980s, putting Americans in a position where they must pay more for a wide range of goods. Investors are seeking strategies to protect their spending power due to the rising cost of living, especially since experts don’t anticipate inflation to return to normal levels for at least another year.

Two straightforward methods to shield your funds from growing inflation prices are Treasury Inflation-Protected Securities, or TIPS, and Series I Bonds. These securities are issued by the U.S. government, whose yields are determined by the level of inflation. For instance, the par value of TIPS increases in line with inflation, however the variable interest rate on I Bonds does not. The interest yield on I Bonds is currently 6.89 percent, but it might change by the end of April.

Long-term evidence also supports the effectiveness of stocks as an inflation hedge. Companies with pricing power can gradually raise their profit margins or retain them by passing on rising costs to their customers. However, in the short term, worries about continuous inflation may frighten investors and lead to a decline in stock prices.

In times of inflation, investors frequently look to gold as a store of value. Gold does not provide any income for its owners, unlike stocks. Instead of getting bigger dividend payments over time like you would with a diverse stock portfolio, you won’t.

Investors in gold can purchase the metal physically or invest through ETFs like the SPDR Gold Shares (GLD).

5. Investing in ESG

The global pandemic’s disruption and unpredictability sparked a resurgence of enthusiasm among investors, customers, and workers to support businesses that prioritize environmental, social, and governance (ESG) issues. These businesses have decided to prioritize long-term value development over short-term earnings in addition to profits.

And it seems like those decisions are paying off. According to Morningstar, inflows into ESG investments reached $120 billion in the first half of 2022, and the total amount invested amounted to roughly $2.5 trillion.

Shares of sustainable firms typically outperform those of their competitors due to their adoption of ethical business practices.

For instance, according to research from Bank of America, shares of companies with good ESG policies are typically less volatile, have greater three-year returns, and are less likely to go bankrupt.

ETFs like the iShares MSCI USA ESG Select ETF (SUSA), which monitors an index of highly rated ESG companies, is one method to invest in socially responsible businesses. American Express (AXP), Accenture (ACN), Disney (DIS), Home Depot (HD), and Hasbro are a few of the companies on the list (HAS).

Organizations with a purpose want to set the tone for a better future. These companies are reinventing the function of business in society by concentrating their efforts on lowering carbon emissions, cutting waste, addressing social issues, and promoting equality, equity, and inclusion, among other admirable causes.

Brian Baker from Bankrate contributed to a previous draught of this article.