21 Smart Investments to Make in 2021

With the coronavirus pandemic raging on, the outlook for 2021 remains uncertain. Many businesses are still shuttered and entire industries are struggling to stay afloat. But a vaccine is being rolled out, so there appears to be light at the end of the tunnel. Amid such mixed signals, it can be perplexing to identify the best investments for the year ahead. (The recent Reddit-fueled juggernaut of GameStop stock only adds to the confusion.) While some see more challenges on the horizon, others predict new opportunities and plenty of options for investing in 2021 that promise positive return. Here's where experts say you should put your money now.

Scott Nyerges and Liane Starr contributed to this story.

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Due to the coronavirus, hotels across the world have struggled or even shut down. But with vaccines already being rolled out, it's a good guess that the dramatic dip in travel will see an upswing over the course of 2021. Credit Suisse thinks Marriott may be the company to emerge with the brightest prospects, as it has multiple growth possibilities and can expect more travel to properties in Hawaii and Orlando. How bright? Credit Suisse predicts an impressive $900 million in earnings for Marriott in 2021.

Related: Marriott and Other Major Hotels That Now Require Guests to Wear Masks

If marijuana isn't legal for medical and/or personal use in your state, you are increasingly the exception to the rule. Although federal approval of the drug isn't likely for several years, so far there's been a hands-off approach to state legalization, making this a better bet than in years past. Green Thumb has 50 dispensaries and holds the licenses to many more. According to The Motley Fool, what sets this company apart is that it's focusing on Nevada and Illinois — two states likely to be dominant going forward. David Bakke, a personal finance writer for Money Crashers, says, "Cannabis probably will continue to become legal in more states and countries, which is a good sign for the sector."

Related: 42 Surprising Facts About the Marijuana Industry

While oil demand has dropped during the pandemic, with fewer people traveling and commuting (and electric cars growing in popularity), we aren't even close to kicking the fossil fuel habit. Credit Suisse says that midsize oilfield company ChampionX has the possibility to see growth in revenue even as competitors struggle, thanks to its high-quality portfolio. 

Related: The Cost of Gas the Year You Were Born

Cybersecurity is becoming more and more necessary as more of us embrace everything from online shopping and banking to putting our personal information (and storing our passwords) online. According to Grand View Research, cybersecurity is poised to grow by 10% a year. The Motley Fool chooses cloud-centric CrowdStrike Holdings, which manages over 3 trillion events per week using increasingly savvy artificial intelligence, as a top stock pick.

Related: 17 Scary Cyberattacks That Hacked Millions of Users

Mutual funds are a time-honored investment tool and a good way to diversify your portfolio no matter what the economic outlook. Look for funds that invest in goods and services that are always in demand, such as food or health care. The Balance recommends Vanguard Health Care Fund, which has a relatively low expense ratio and a minimum initial investment of just $3,000. It has returned about 9% over the past year and 14.2% over the past decade.

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With many stocks overvalued in terms of price-to-earnings ratio, Gladice Gong, creator of Earn More Live Freely, suggests shifting some money to investment-grade bonds. "It's a good idea to take profit from your stocks and move some of your money into safe and liquid investments such as investment-grade bonds to protect yourself from a possible stock market correction," said Gong, who suggests investment-grade bond ETFs, or exchange traded funds, which are similar to stock ETFs and offer a low expense ratio.

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Another move to make if you have any concerns about the stock market is investing in what Gong of Earn More Live Freely calls defensive stocks. "You might want to hold more high-dividend defensive stocks and stay away from growth stocks and cyclical stocks," she says. "This way, you can protect yourself from the volatility in the market." One example she gives is consumer-staples stocks such as McDonald's and Coca-Cola.

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Monster Beverage took a hit during the pandemic because, with 70% of sales coming from convenience stores, people weren't as eager to pop in for an energy drink as they had been before. But Credit Suisse is predicting that 2021 will be a monster year for the brand (pun intended) thanks to a revamped retail team and promising innovations in the works.

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Just as Zoom took off during the pandemic, so did telemedicine. Teladoc was already booming before COVID-19 hit, growing at an annual rate of 75% since 2013. The company is expected to have earned a whopping $1 billion in sales in 2020 alone. Although the coronavirus may no longer deter people from going to the doctor's office once vaccination is widespread, telemedicine is cheaper for health insurers and more convenient for both doctors and patients, which means dialing up a doc is a trend that will survive 2021 and beyond. 

Related: 14 Telemedicine Services for Health Care at Home During the Pandemic

Throughout the pandemic, electric vehicles remained in a strong position on the stock market, says Maciej Glowacki of LetMeBank. Tesla is now around $850 per share. "Its Chinese competitor NIO has skyrocketed from $2 per share back in March to more than $62 currently," Glowacki says. "There's still a lot of potential for it to increase even higher in market value, as it's only the beginning of the electric vehicle market."

Related: 11 Surprising Things That Tesla Makes That Aren't Electric Cars

In early October 2020, Charles Schwab completed the acquisition of discount brokerage rival TD Ameritrade. By early November, investors began developing a heightened appreciation of the significant potential upsides for the company as a result of that giant acquisition, and shares appreciated by about 30% from Nov. 4 through year's end, says Bernie Schaeffer, founder, CEO, and editor-in-chief of Schaeffer's Investment Research. Schaeffer says Charles Schwab is likely to be a breakaway stock for 2021 that will experience strong price movement.

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Shares of big coffeehouses (think Starbucks and Dunkin' Brands Group) underperformed in the past year due to social-distancing policies and lockdowns amid the COVID-19 pandemic, making share prices more affordable in 2021, says financial adviser and accredited wealth management adviser Tiffany Welka of VFG Associates. "Another benefit to investing in coffee is that it's completely global in all forms — instant, prepared, K-Cups," Welka says. "There has been tremendous growth over the past 20 years here."

Related: From Mocha to Java: The Secret History of How Coffee Took Over the World

During the pandemic, there's been a growing demand for video games and video gaming activities (not surprising, since we're all spending so much time at home). This trend is likely to continue in 2021, with the COVID-19 pandemic still ravaging the country, says Welka of VFG Associates. "Video games have been one of the biggest beneficiaries of social distancing and stay-at-home policies." Notable choices include video game developer and publisher Capcom and Take-Two Interactive.

Related: 23 Companies That Have Actually Benefited From the Pandemic

The best thing for most novice investors is to opt for a low-fee, broadly diversified stock market index fund, says Robert Johnson, certified financial adviser and professor of finance at Heider College of Business, Creighton University. One of Johnson's top picks is the Vanguard Total Stock Market Index Fund ETF (VTI). "The fund is designed to track the performance of the Center for Security Pricing (CRSP) U.S. Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and NASDAQ," says Johnson, co-author of the book "Strategic Value Investing: Practical Techniques of Leading Value Investors."

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A fund like Financial Select Sector (which includes among its holdings Bank of America, Wells Fargo, Citigroup, and JP Morgan Chase) stands to benefit from the likely economic recovery that's on the horizon for 2021, Johnson says. "With these firms selling at below-market price-to-earnings ratios, investing in a broadly diversified basket of financial stocks has significant upside and likely has lower downside than the broad market." This particular fund carries a 4-star rating from Morningstar.   

As the pandemic rages on, the war on cash continues, says Jason Moser, senior stock analyst and lead adviser at The Motley Fool, who says 2020 was a phenomenal year for PayPal. "Total payment volume for the company is now operating at an annual run rate of close to $1 trillion," Moser says. What's more, PayPal projected in August it would add a whopping 70 million new active user accounts to its platform in 2020 alone. To provide a sense of how significant that number is, it took PayPal from 2017 until 2019 to acquire a similar number of new user accounts (about 76 million). "And don't forget that PayPal also owns the popular Venmo platform, which now has over 65 million users and drove $44.3 billion in total payment volume in the third quarter of 2020 alone," says Moser, adding that investments in strong mobile offerings are starting to pay off in droves for PayPal. And as more people move more money electronically, the company is poised to do well in 2021 and beyond. 

Moser of The Motley Fool also points to Cloudflare, a global cloud-computing platform that helps businesses become speedier, more secure, and more reliable through its suite of products. "It makes its money via pay-as-you-go channels as well as subscription and contractual offerings, meeting customers on their terms," he says. "Launched three years ago, Cloudflare Workers is now one of the largest and most widely used edge-computing platforms in the world, and as connectivity continues to proliferate, Cloudflare is poised to benefit, as its services will be widely needed and used."

The Walt Disney Co. doesn't really need an introduction, but it has changed a lot since it was founded by Walt and Roy Disney almost 100 years ago, says Kassem Lahham, co-founder of the financial intelligence platform Springbox AI. "In addition to its very familiar subsidiary companies, such as Pixar, Marvel, Hulu, 20th Century Fox, Lucasfilm, and the Disney parks, it has had a footprint in the digital world for a long time," Lahham says. "What investors are most excited about is Disney's foray into online streaming. Although there are already giants like Netflix and Apple in the industry, many analysts give Disney a bullish outlook."

Related: 25 Ways Disney Revolutionized Entertainment

A Dutch payment-service provider with more than 3,500 customers worldwide, Adyen offers stores the ability to process payments online. "Since its June 2018 IPO on Euronext in Amsterdam, the share price rose 350% by the end of 2020," Lahham says. "And with an influx of consumers and suppliers turning to e-commerce, I project that digital payment service providers will continue to be bullish in the future. Keep both eyes on this sector, in any case. Since Adyen has secured banking licenses in Europe, Australia, Singapore, and Hong Kong — and has closed a deal with eBay — the stock should be among the best stocks in 2021."

As COVID-19 reminds us, everyone should have an emergency fund in place to help in case they experience income loss or receive an unexpected bill, says Greg Klingler, director of wealth management at the Government Employees' Benefit Association. "A good baseline is three to six months of expenses in liquid cash," says Klingler, adding that 47% of Americans would struggle to immediately produce $400 to pay an unexpected bill.

One of the primary ways to provide your family with financial security after you're gone, which is especially relevant amid COVID-19, is through life insurance. "This is typically a tax-free legacy passed onto heirs," says Klingler of GEBA. "And the funds can be put toward everything from the mortgage to burial costs and estate taxes."