The new year is time for resolutions, and a great one is to put your money to work for you. Whether you have $100 or $100,000 to invest, you can get started along the path to building wealth. And if you're already a seasoned investor, now is a good time to look at your portfolio and make adjustments to support your investing goals. For instance, if you're interested in generating more passive income, you may want to buy more dividend stocks. Or if your portfolio's performance has been sluggish, you may want to add more growth stocks to the mix.
But where should you invest your money right now to potentially gain in 2025 and beyond? I have a few suggestions, including assets that could excel in the current market environment as well as over the long run. For the purpose of this article, I'll consider we have $100,000 to invest -- but you can apply the same strategy with a much smaller amount too. I'll also consider that we're middle-of-the road investors, so we want to equally invest in growth and "safer" sorts of investments. Let's get started.
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The S&P 500 bull market
So, first it's important to consider the recent past and what may be ahead for the stock market. The S&P 500 confirmed its presence in a bull market a year ago and has been roaring higher ever since, ending 2024 with a 23% increase. Optimism about a lower interest rate environment and the potential of artificial intelligence (AI) has driven gains, and investors have poured into stocks that may benefit the most, such as growth and technology players.
It's impossible to predict with 100% accuracy whether stocks will continue to soar this year. But we do know one important thing: Over time, even after the worst crashes, the stock market always has gone on to recover and gain. And this is why it's critical to choose investments that could excel both in today's market and over the long haul.
Considering that we're in the early days of the AI growth story, with a forecast for today's $200 billion market to reach $1 trillion by the end of the decade, it's reasonable to expect more gains from certain key players. And this is why I would invest $20,000 in technology stocks, including AI chip leader Nvidia, but also companies that are involved in AI but don't necessarily rely on it for revenue growth -- for example, e-commerce and cloud giant Amazon and social media powerhouse Meta Platforms.
These companies all have a long track record of earnings growth, could benefit as AI continues to gain momentum, and should perform well in positive economic environments over time.
Favor diversification
I also favor diversification to support strong performance -- if one particular industry or stock falls, others may compensate. And to ensure solid diversification, I recommend investing $20,000 in an S&P 500 index fund such as the Vanguard S&P 500 ETF (VOO -1.12%). You could invest your $20,000 all at once, or you could make an initial investment of, say, $1,000, and then invest a smaller amount monthly over time to benefit from the magic of compounding.
The Vanguard S&P 500 exchange-traded fund offers you exposure to the top companies driving the economy, and over time, the S&P 500 has delivered an annualized average return of more than 10%.
I then would invest another $20,000 in individual stocks and ETFs across industries and across styles of growth and value. You could weigh more heavily certain investments here according to your comfort with risk. For example, if you're a more aggressive investor, you may favor growth stocks. And I mention ETFs because they're a good way to gain exposure to several players within a certain theme or industry -- for instance, small cap players or biotech.
Buy dividend stocks
Next, I would use $20,000 to buy dividend stocks -- this will pretty much guarantee you passive income every year no matter how the market or the individual stock performs. To be certain you're getting a player that will continue paying a dividend and even increasing payments, consider Dividend Kings like Coca-Cola or Johnson & Johnson. These are companies that have lifted their payments for more than 50 years, a sign that rewarding shareholders is important to them.
Finally, I would set aside $20,000 as an opportunity fund, and I would dig into this any time I find a buying opportunity during the year. You always want to have some cash set aside to scoop up a new stock or add to a position.
It's important to note that before you get started on this plan -- with $100,000 or even much less -- make sure that you don't immediately need this cash and that you have an emergency fund in place to cover any unexpected daily expenses that could arise.
With this investment plan, you could very well see your portfolio take off in 2025, but even better, you may set yourself on the path to investing success over the long term.
