With the Holiday season ending, it is time to re-think your investment strategy for New Year. 2013 was a year of U.S. stock market where Standard & Poor 500 Index generated returns of 26.4 percent. One of the biggest reasons behind this performance was the Federal Reserve Quantitative Easing Program, which helped the stock market produce excellent results. Similarly, the commodity market witnessed a loss of 7.8 percent as recorded by the Dow Jones-UBS Commodity Index, according to Morningstar. If you are planning to earn better returns in 2014, here are some top investments for your portfolio.
Choose Stocks with high growth potential
Last year was a great year for the US stock market and most of the stocks performed well. There are speculations that the US stock market will perform well in 2014 as well. The key is to invest in a wide variety of stocks and some of our top picks are listed here.
- CVS Caremark: CVS acquired Caremark in 2007 and emerged as the first integrated drugstore of the healthcare industry. With over 7,300 stores through the country, CVS is the primary company for managing employer health plans, Medicaid services, and Medicare Part D prescription plans. Further, the Affordable Care Act will benefit the company because of another 30 million people insured under prescription drug plans. The stock might trade at 17.1x its consensus estimates and offer an attractive dividend of 1.3 percent.
- Accenture (ACN): Accenture is one of the best technology companies with global clientèle. The company has shown promising growth in cloud industry along with developments in mobile sector. The company is diversified with its roots in outsourcing services and better regulation in different industries. The company has a debt free balance sheet and offers excellent returns on equity. It is trading at 16.4x the consensus and we can hope a similar performance in 2014 with a dividend yield of 2.5 percent.
- Johnson & Johnson: JNJ is among one of the most consistent stocks with a compound growth of 10 percent for the last 10 years. A company could not be more diversified than JNJ considering its roots in every sub-sector of health-care. JNJ is a global franchise generates nearly 57 percent of its revenue from international markets. It is an appropriate investment for long-term and according to the current valuation of 16x 2014E EPS along with a dividend-yield of 2.8 percent; this stock is a good option.
- Apple (APPL): Apple has become a dividend stock with the current dividend of 2% and we can expect it to rise by another 10 percent in future. Apple iPad has performed well along with the latest models of iPhone. In the last 3 months (since September 2013), Apple has performed way better than any other S&P 500 equal weighted IT stock. Further, the Apple CEO, Tim Cook, announced better products and software solutions from Apple in 2014. Apple may not provide the high returns as that of Twitter, LinkedIn, and Netflix, but it is a stock to buy in 2014.
Best Investments in 2014: Invest in Bonds
The Federal Reserve buys bonds worth $85 billion every month and there are chances that this amount might increase in 2014. There is an indirect relation between the amount of bonds purchased and the interest rates. We can expect lower interest rates and higher bond prices in 2014. If we consider the average earnings of 10-year Treasury bonds against the S&P 500, Treasury bonds have gained 7.21% as compared to the 3.41% annualized returns offered by S&P 500. However, considering the performance of S&P 500 in 2013, bonds might not be able to beat their returns, but they will certainly offer stable returns in the longer run.
Investments for 2014: Choose bank-loan funds
Bank-loan funds are mutual funds that comprises of loans sold by the banks to high leverage companies. These funds offer a floating payout, which offers a chance of increase in payout according to the increase in interest rates. These are much stable as compared to the bonds and in case of losses incurred by company, these loans are paid on priority basis. It is best to choose open-end funds because of the liquidity they offer. However, you might want to discuss your investments with a investment consultant because these funds do carry a certain degree of risk for average investors.
Bad Investment for 2014: Do not invest in commodities
With Gold losing over 28 percent in its value and the extraordinaire performance of the stock market, we can expect commodities to drop further in 2014. The analysts are expecting an oversupply in 2014 and the performance may suffer. The best time to buy Gold is when economies are suffering along with heightened inflation rates. Do not invest in commodities in 2014.