Hunt for income: the most profitable areas of investment in the coming year have been named

At first glance, it was unrealistic to make money, especially for a simple unqualified investor, in such a difficult year. However, in fact, in 2023, many reliable financial instruments brought their owners, who wisely placed their savings, a very good income, which even allowed them to protect their savings from rising inflation. What investments turned out to be the most successful for Russians in 2023?

We will, of course, put stocks first. The Moscow Exchange Index, which is an aggregated indicator of the state and dynamics of the Russian stock market, has grown by 42% since the beginning of 2023. A return on financial assets of 42% per annum is an investor’s dream, because if you simply keep money in a ruble deposit in a bank, you will not earn such a return. But by investing in shares and trading on the stock exchange, if your experience and knowledge allow you to do so, you can earn such returns not even in a year, but in just a few months, weeks or, if you’re lucky, even in a matter of days.

For a whole year, if you invest in shares of the most reliable blue chip companies, and even more so in such shares that not only reward you with small dividends every six months or a year, but in which there is a so-called investment idea that encourages investors to buy securities over a long period of time, you can earn returns that are many times higher than the growth of the stock market index. For example, shares of leading companies in the banking and oil and gas sectors brought investors returns for 2023 of over 40%, 80% and even 100% per annum.

At the same time, the results of 2023 do not at all say that you need to immediately withdraw money from a reliable bank and buy shares indiscriminately and without understanding why and for what purpose you are buying them. In the stock market, investors’ risks are also high, and even reliable companies can bring losses instead of the expected profit. For example, shareholders of Gazprom, one of the largest and most reliable companies on the Russian stock market, were losers in 2023: stock prices fell over the year, although not by much, and the company was not pleased with its dividends. And all because Gazprom has lost almost all of its huge share in the European gas market and is now reorienting its gas exports to countries friendly to Russia, primarily increasing supplies to China.

In second place we will also have the stock market, but this time we will pay attention to such a mechanism for making money on the stock market as collective investment. By buying shares of mutual funds (UIFs), you essentially share your risks with other investors and are not overly dependent on the risks of investing in an individual stock. So, if your stock fell rather than rose against your expectations, you suffer a loss, but if you entrusted your funds to professional asset managers licensed by the Bank of Russia, they will be able to hedge your investment through investments in a stock portfolio.

One stock is falling and the other is rising, so you are very likely to be guaranteed at least a small income in a rising market. Very often, this income is lower than the return on the stock market index and lower than the return on individual shares that have risen in price, but the investment risks in collective investing will be less than when purchasing one or two shares on your own. In 2023, in most reliable Russian mutual funds investing in shares of Russian companies, it was possible to earn 35–42% per annum, that is, on par with the Moscow Exchange index or slightly lower, but still higher than if you kept a deposit in a bank at a low interest rate .

Investing in mutual funds is a great opportunity to earn more than interest on deposits, while bearing much less risk of loss than investing in individual stocks on your own.

In third place in terms of profitability we will have foreign currency. World reserve currencies, that is, those currencies in which the central banks of the countries of the world store their international reserves, have become “toxic” for Russians since the spring of 2022, since half of the gold and foreign exchange reserves of the Bank of Russia were blocked in the West due to sanctions. The dollar and euro have suddenly turned from the most reliable investments into risky ones, and the only world reserve currency that does not pose risks for Russians is now the Chinese yuan.

Nevertheless, many Russians still buy cash dollars and euros and most often keep them under their pillows until better times, and not necessarily in order to travel abroad, most often in order to simply sell them at a favorable rate. Despite the risks, holders of cash euros could earn 28% per annum in 2023 by simply buying euros at the beginning of the year and selling them at the end of the year (and if they sold euros in August 2023 at the maximum rate, they could earn even more). Well, US dollar custodians earned about the same (26% per year). Holders of cash yuan earned slightly less (but still not bad) (23% per annum), and with much lower sanctions risks. This is a good return, but we note that investors in residential real estate could earn approximately the same amount, despite the fact that the latter is much more difficult to buy and sell than shares or currency.

However, if you bought an apartment in Moscow on the secondary market at the beginning of 2023, and then sold it at the end of the year, then you had a chance to get 20% more for it than the purchase price, because this is exactly how the cost per square meter of residential real estate changed over the year. capital in 2023.

Well, what investments will be the most profitable in 2024? We believe that the coming year for the stock market may be difficult due to geopolitical processes and, possibly, due to lower commodity prices than in 2023, and commodity prices are of great importance for the Russian stock market. Therefore, next year, investments will come to the fore that may not bring very high returns, but will turn out to be highly reliable and protect your savings from inflation. We believe that this could be investments in investment gold, which can be purchased at any Russian bank licensed to work with precious metals, or in unallocated metal accounts, which are the non-cash equivalent of gold.

Since interest rates will stop rising in the US next year, the dollar will begin to weaken and will not be the best investment. This means that it will be possible to make money on the dollar. Ruble deposits at 12.5–17% per annum can also become both a reliable investment and protection against inflation due to the fact that the Bank of Russia will most likely keep the key rate high, at 16% per annum, and this will mean that interest rates on bank deposits, which increased in 2023, most likely will not fall in 2024, at least during the first half of the year.

Interesting investments could be bonds of highly reliable companies, on which you can earn 15–17% per annum, and government bonds with a yield of 11–13% per annum. And the best thing to do is to diversify your investments – “don’t put all your eggs in one basket,” as stock market wisdom says.