2 Top Trends to Invest $1,000 in Right Now

REITs and defence stocks could be a good side play in 2024.

| More on:
top TSX stocks to buy

Source: Getty Images

I’m a firm believer in the “core and explore” investment strategy, which advocates for building the foundation of your portfolio with broadly diversified, low-cost index exchange-traded funds (ETFs), while reserving a portion for higher-risk stock picks.

This approach combines the stability and broad market exposure of index investing with the excitement and potential high rewards of stock picking.

A compelling way to utilize the “explore” portion of your portfolio is through thematic investing. This involves betting on long-term trends in industries that are either emerging or poised for a rebound.

Whether it’s a sector that’s innovating rapidly or one that’s set for a resurgence, thematic investing allows you to capitalize on these trends.

The versatility of ETFs makes them an ideal vehicle for thematic investing. They offer the opportunity to invest in a concentrated theme or industry without the need to pick individual stocks.

With the vast array of ETFs available in the market today, there’s likely an ETF that aligns with almost any investment theme you believe in.

As we navigate through 2024, there are two top trends that I’m particularly excited about — here’s what they are and the ETFs you can use to invest in them.

Canadian REIT resurgence

Real estate investment trusts (REITs) in Canada have certainly faced their share of challenges throughout 2022 and 2023, largely due to rising interest rates. When interest rates increase, it tends to hurt REITs in a couple of key ways.

Firstly, higher rates can increase their borrowing costs, as many REITs rely on debt financing. Secondly, as interest rates rise, investors often shift towards fixed-income assets like bonds, which become more attractive due to their higher yields, leading to a selloff in REITs.

However, as we move into 2024, there appears to be a light at the end of the tunnel for Canadian REITs. With the Bank of Canada pausing rate hikes for three consecutive sessions and even contemplating rate cuts, there’s a potential for upside in this sector.

Many Canadian REITs, particularly office REITs, haven’t fully recovered since the COVID-19 pandemic. This presents an opportunity for investors to capitalize on these lower valuations.

For those looking to invest in this trend, iShares S&P/TSX Capped REIT Index ETF (TSX:XRE) is my preferred choice to capture the Canadian REIT sector.

One of the attractive features of this ETF is its monthly distributions, which can be particularly appealing for income-seeking investors. As of January 16, XRE is projecting an annualized distribution yield of 5.36%.

Defence stocks in case of war

The heightened geopolitical tensions worldwide, notably following the February 2022 Russian invasion of Ukraine, and subsequent events like the October attacks on Israel by Hamas, the Houthi attacks on shipments in the Red Sea, and hostilities involving Iran, Pakistan, and Iraq, have brought defence stocks into focus.

In such times, U.S. aerospace and defence contractors often see increased interest from investors. Given this backdrop, the only ETF available to Canadians in Canadian dollars that focuses on this industry is the new iShares U.S. Aerospace & Defense Index ETF (TSX:XAD).

This ETF tracks the Dow Jones U.S. Select Aerospace & Defense Index, which includes a concentrated portfolio of 35 companies involved in manufacturing planes, missiles, tanks, ships, and other critical defence and aerospace equipment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Tony Dong has positions in iShares U.s. Aerospace & Defense Index ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

grow dividends
Dividend Stocks

2 Dividend Stocks to Use as Building Blocks for Lasting Wealth

Dividend stocks that are raising their dividends over time could create lasting wealth for investors. Here are a couple of…

Read more »

Glass piggy bank
Dividend Stocks

New Investors: How to Make the RRSP Work for You Now and Not Just in Retirement

The RRSP can work for you in retirement, but it can also bring huge benefits right now for investors looking…

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

Retirees: 2 High-Yielding Dividend Stocks to Buy Today

These TSX dividend-paying stocks can be a retiree’s best friend in their self-directed portfolios for additional income in retirement.

Read more »

money while you sleep
Dividend Stocks

2 Stable Stocks for Sleep-Better Investing

Boasting rock-solid underlying businesses and great financials, these two stable stocks can be perfect holdings for your portfolio.

Read more »

Money growing in soil , Business success concept.
Investing

3 Growth Stocks to Keep Your Eyes on

Growth stocks could make you lots of money, especially if you are able to buy them on sale and hold…

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

After their recent declines, these two Canadian dividend stocks look even more attractive to buy for the long term.

Read more »

Young woman sat at laptop by a window
Investing

Should You Buy Savaria at These Levels?

Given Savaria's solid financials, healthy growth prospects, and attractive valuation, I am bullish on the company.

Read more »

A bull outlined against a field
Investing

These 3 High-Growth Stocks Could Power the Bull Market’s Next Record Run

Are you interested in high-growth stocks? These companies could power the bull market’s next record run!

Read more »