The Most Popular Trading Instruments Across Different Asset Classes

The year 2024 is bringing some changes in the financial markets, presenting both challenges and opportunities for traders. Investing in the appropriate trading instruments and classes is essential for profiting from market trends and attaining your investment objectives.

This article provides a comprehensive guide on the most popular trading instruments in different asset classes to invest in 2024.

Building a strong and effective portfolio is crucial for a successful trader. Many factors must be considered to create a profitable portfolio with minimum risks. Asset allocation and diversification are key elements of a good investment portfolio.

Implementing effective diversification can stabilise a portfolio by minimising the overlap between assets. Since inflation is the greatest risk for an investment portfolio, having assets that generally rise along with inflation is a central element of an effectively diversified portfolio.

Markets that appear expensive today tend to perform worse than those that appear cheap today, and vice versa. This means that constantly monitoring global markets can help you avoid economic bubbles and capitalise on your portfolio.

To create a good investment portfolio, list financial goals, determine your risk tolerance, and add traditional and alternative asset classes to it.

Asset allocation involves dividing money into different classes for capital appreciation and limiting losses. Diversify investments within these classes, such as 90% between large- and mid-cap stocks and multiple sectors. Regularly monitor and adjust your investment portfolio, checking it twice a year to ensure alignment with goals and rebalancing holdings if the market is volatile. Using a robo-advisor can help with rebalancing.

The financial markets are showing resilience in 2024. As investment sectors are well on the upside, it's a good time to discuss the best trading asset classes for the year. Reevaluating financial goals is essential to ensure investments align with goals.

In 2024, investors are seeking to diversify their portfolios to achieve financial goals. There are nearly infinite profitable financial trading instruments worldwide to do this.

The top wealth-generating assets for 2024 are cryptocurrencies, stocks, FX pairs, ETFs, real estate, and commodities.

Let's discuss each class in more detail and determine the best trading instruments in each asset class.

Cryptocurrencies are widely employed for trading due to their lack of central control, ability to raise in value quickly, and use of blockchain tech. These digital coins facilitate the transfer of funds and can generate significant profits for those open to substantial risks.

To succeed in 2024, traders should diversify their portfolios, balance established and emerging cryptos, stay informed about regulations, use advanced trading tools, and stay updated with blockchain technology and market trends.

Bitcoin, also known as 'digital gold', was created as an alternative to the fiat monetary system. Its author, Satoshi Nakamoto, argued that central banks' money printing led to centralised wealth and power, making social and financial mobility difficult. BTC fixed unit-issued numbers, prevented inflation, and used peer-to-peer blockchain technology to eliminate financial institution involvement. Today, BTC remains the most popular cryptocurrency.

Bitcoin is leading the cryptocurrency landscape in 2024 due to its robust performance in 2023 and growing institutional adoption. Its limited supply, status as a value store, and Bitcoin ETF approved by the Securities and Exchange Commission are expected to contribute significantly to the crypto surge.

Ethereum, the second most popular crypto token, is a blockchain platform for smart contracts, which has defined rules that can be used to create decentralised applications like games and Initial Coin Offerings (ICOs). Unlike BTC, which aims to replace traditional fiat currencies, Ether is a utility crypto that pays for the use of the ETH platform despite being traded as an asset.

Ethereum is poised to become a valuable store of value for wealth optimisation. It functions well with DApps, NFTs, smart contracts, and DeFi, with the list growing annually. As the network strengthens and the ETH team develops innovative features, investors are expected the coin to grow.

The Solana blockchain, developed in 2017, is a permissionless layer-1 blockchain with advanced proof-of-history (PoH) and a range of DeFi platforms, NFTs marketplaces, smart contracts, and dApps. Its market capitalisation is valued at $37.4 B as of March 2022.

SOL is gaining popularity in DeFi and NFTs due to its fast transaction speeds and low fees, positioning it as a strong contender in the market.

The stock market is a financial market where listed companies' shares are traded, offering a safe and profitable form of trading. Stocks allow investors to harness compound growth, earning returns on initial investment and subsequent returns.

Stocks from emerging markets, spanning Asia, Africa, and South America, offer high-risk, high-reward opportunities due to rapidly developing economies, increasing consumer markets, and underexploited resources. Success depends on understanding regional economic drivers and political climate.

Nvidia, a high-end semiconductor maker traded on major stock exchanges, has experienced significant growth in the past 15 years, with revenue increasing 262% and net income increasing 628%. Analysts predict that Nvidia will benefit from artificial intelligence edge computing technology, including autonomous vehicles and AI agents.

However, the company also saw growth in gaming and automotive, with revenue rising 18% and 11%, respectively. The automotive segment, which includes income from chips supplied to self-driving technology companies, could be a major growth catalyst as chip demand rises alongside the expanding industry. Nvidia's price/earnings-to-growth ratio (PEG) is less than 1, making it a value play.

Google parent Alphabet continues to dominate the search engine industry, with its cloud computing venture generating 28% revenue growth in Q1 2021 and now profitable, generating $900 million in operating profits.

Experts predict the worldwide cloud computing market will grow at over 16% annually through 2029, indicating significant profit potential. Alphabet handles 90% of the world's web searches, and analysts predict annual revenue growth of 10% to 14% through 2025, highlighting its potential in AI technology. CFRA has a "buy" rating and a $190 price target for GOOGL stock.

Amazon, a tech giant with strong leadership and financial resources, has seen significant growth in e-commerce, video streaming, and cloud computing since its inception in 1994. In Q1 2024, Amazon's revenue increased 13% YoY due to retail segment growth and Amazon Web Services' profitable cloud platform.

Advertising services revenue also soared 24%, with Prime Video streaming service ads contributing to a 24% increase. As Amazon continues to expand in AI and other tech areas, its stock could outperform its previous success.

Forex trading is a crucial arena for traders, offering opportunities through major and emerging market currency pairs. It involves navigating global economies, predicting currency movements, and understanding the economic context.

Forex trading instruments can mitigate currency devaluation risk and are popular for geopolitical risk aversion. The market has grown significantly due to international trade growth and digitisation, with a compound annual growth rate of 7% between 2023 and 2028.

EUR/USD is the most traded currency pair, representing the world's two largest economies, the European single market and the US. The high daily volume of transactions ensures liquidity and tight spreads, making large trades with minimal market impact attractive. The exchange rate of EUR/USD is determined by factors like interest rates set by the European Central Bank and the US Federal Reserve, as higher interest rates lead to higher demand and better returns on initial investment.

The EUR/USD pair is popular due to its low spread and stability, making it ideal for almost any investment portfolio.

The USD/JPY currency pair, also known as 'the gopher', is the second most traded asset in FX. Its high liquidity is due to the yen's heavy trading in Asia and the US dollar's global prominence. The Bank of Japan sets interest rates for the Japanese economy, which affects the yen's value relative to the US dollar.

The USD/JPY pair is popular due to its low spreads and smoother trends, making it a preferred choice for investors seeking predictable movements.

GBP/USD is a currency pair between the pound sterling and the US dollar. If the British economy grows faster than the US economy, the pound strengthens against the dollar. The strength of GBP/USD is influenced by the respective strengths of the British and American economies.

The GBP/USD pair is popular among FX traders due to its potential for profitable pips and significant price movements, but it also comes with greater risk due to its volatility.

Real Estate Investment Trusts (REITs) are a popular investment option for investors seeking stability and growth. They invest in commercial real estate properties and distribute most of their taxable income to shareholders as dividends. This structure often leads to higher yield returns than other equities. REITs also offer portfolio diversification, as the real estate market often follows different economic cycles, providing a hedge against volatility in traditional asset classes.

Prologis, an industrial REIT specialising in logistics real estate, is predicted to experience solid revenue growth in 2024, despite concerns about e-commerce growth due to its strategically located logistics centres and valuable land portfolio.

Prologis's market cap is nearly $104 billion, and it demonstrates consistent growth, with an 11.57% CAGR in AFFO over the past five years, outpacing the sector's average of 1.91%. These factors make it attractive for investors with a 20-30-year investment horizon. Prologis pays a healthy 3.16% dividend that has grown at a remarkable 12.58% CAGR over the same period. Despite a 2008 dividend cut, Prologis has proven to be financially and strategically stronger since.

American Tower, the world's largest wireless communications and broadcast towers, is poised for growth due to 5G expansion and low international market penetration, making it a solid investment if the economy remains strong.

Analysts believe the company can capitalise on global mobile data demand growth and diversify its tower assets internationally. The company's first-quarter financial numbers were impressive, and market conditions are expected to improve in the coming quarters.

Equinix is a global data centre, interconnection, and edge solutions platform that enables secure interconnection to networks, clouds, and content for the global digital economy. It offers a unique position with limited competition and a stable revenue base, making it a top REIT for 2024.

The company's International Business Exchange data centres and expertise are relied upon by global enterprises, service providers, and industry partners. Equinix's Zacks Rank #2 (Buy) indicates year-over-year growth of 8.5% in 2023 and 7.7% in 2024.

ETFs are gaining popularity due to their versatility, user-friendly nature, and ability to provide investors access to finance markets. They allow for investment in various sectors of the economy. ETFs are investment funds that target particular industries, commodities, bonds, and international markets. This lets investors personalise their investment portfolios according to their risk tolerance and desired outcomes. ETFs strike the perfect balance between individual stock growth potential and mutual funds risk diversification.

Vanguard, a pioneer in passive investing, has created some of the world's largest index funds. Its investment team has extensive expertise in closely tracking indices and markets and reducing costs.

The Vanguard S&P 500 is a large ETF that tracks the S&P 500 index and has hundreds of billions in assets. Established in 2010, it has an expense ratio of 0.03 % and a 5-year annualised return of 15.2 %. It is suitable for investors seeking a low-cost, broadly diversified index fund as a core holding in their portfolio.

The Schwab U.S. Dividend ETF (SCHD) is a dividend-focused investment strategy that focuses on blue-chip stocks with reliable dividends, offering an attractive yield and a dual benefit of growth and income.

Schwab US Dividend Equity ETF aims to find a balance between quality and yield by requiring holdings to have at least ten years of annual dividend increases. The ETF creates a composite score based on cash flow to total debt, return on equity, dividend yield, and the five-year dividend growth rate.

The top sectors in the Schwab US Dividend Equity ETF are finance, healthcare, consumer staples, industrials, and energy, making up roughly 70% of the portfolio. This diversification difference allows Schwab to invest more in growth-oriented sectors, ensuring a more balanced approach to dividend investing.

The Invesco S&P 500 Equal Weight ETF (RSP) is a diversified investment strategy that equally weights its holdings across various companies, offering better returns by giving more weight to smaller, growing companies. Its unique portfolio balancing and reasonable expense ratio make it a viable option for investors.

The investment tracker aims to invest at least 90% of its total assets in the S&P 500 Top 50 Index, consisting of the 50 largest companies, based on float-adjusted market capitalisation. The fund is non-diversified and invests at least 90% of its assets in the underlying index.

Commodities like gold and oil remain crucial in trading as they serve as hedges against inflation and economic downturns. Successful commodity trading requires a deep understanding of global economic trends, market analysis, and forecasting of supply and demand shifts. Traders and investors must stay informed about geopolitical events, policy changes, and technological developments that could impact commodity markets.

Gold remains a secure asset despite economic uncertainties and inflationary pressures, as its price is inversely correlated with the US dollar, making it a hedge against currency fluctuations. As of December 2023, gold's price is $2,030 per ounce, offering significant profit-making opportunities for financial experts seeking diversification. Due to macroeconomic factors, gold is expected to experience a significant upturn in 2024.

Gold's worth extends beyond electronics and jewellery, and investors seek to increase exposure during tumultuous times. Its inverse correlation with US bond yields makes it highly traded.

In 2024, oil remains a crucial commodity, influenced by OPEC+ policies and geopolitical tensions. Initial market stability is expected, but potential deficits suggest rising prices. Major player actions and Middle East tensions could significantly impact supply and prices.

Brent crude oil is a crucial global benchmark for oil prices, influenced by geopolitical and economic factors. The COVID-19 pandemic led to a decline in demand and a fall in oil prices. The World Bank predicts a 5% fall in energy prices in 2024 due to reduced demand pressure, followed by a 29% drop in 2023 and a further 0.7% drop in 2025. These factors significantly impact energy prices and stock markets.

Copper, a highly conductive metal, powers the technological world and is used in consumer electronics, renewable energy infrastructure, and electrical wiring, making its demand a reliable indicator of economic health.

Electric vehicle sales levels over the next ten years are subject to significant changes due to interest rates and economic conditions. This will impact copper demand from automobile sources, but it overlooks the need for expanded grid capacity. Copper supply projections are also varied, with lower supply generally resulting in global growth in prices. Some experts predict copper could reach $15,000 per ton in 2025 under favourable conditions.

In 2024, success in trading depends on a strategic approach to top instruments, staying updated with market trends, understanding their nuances, and implementing effective risk management techniques.

Understanding popular trading instruments from various asset classes is crucial for building a robust and effective portfolio that will help you efficiently use your trading strategies and add to the wealth growth.