Forget AI and Quantum Computing, These Are My 3 Best Investing Ideas for 2025

It is that time of year where we try and identify the best opportunity for the new year. This is always a difficult task, with so many moving pieces, but this time it seems particularly hard.

A new administration is about to take over in Washington, D.C. We have a decent sense of what they want to accomplish, but even that isn’t certain. We have less of an idea of what they will accomplish. 

Even more “interesting” (read, challenging) is the influence of unelected officials. With powerful people such as Elon Musk involved, we could see things go off on different tangents. We might also see President Trump shifting his relationships, as he has done in the past.

Away from home:

• The Chinese economy is moribund, at best, and so far stimulus has done nothing to fix that. To the extent that economic weakness could bring down President Xi (and possibly the CCP), they will need to do more, but what?
• The European economy is in a rut. The politics are shifting a bit towards Make [Insert Country Name} Great [Again, for those that were once great). That would be challenging enough, but there is currently a war in Europe and the German economy, which has been the juggernaut that helped Europe weather recent crisis, is in itself, in some trouble.
• The Middle East is trying to emerge as a force outside of energy (data centers, etc), but is caught with a war in the region.

So there's a lot to digest as we look for the best trade of 2025.

Reiterating 2024’s Best Idea

I really liked closed-end muni funds as by far the highest weighting in your income portfolio in 2024. Last year I limited my scope to the income side of your portfolio and was adamant about owning closed-end muni funds (and to some extent trading around the discount to NAV).

The closed-end muni funds I own (I do trade some, during the course of the year, based on NAV) had returns ranging from 3% to almost 10%, with the average roughly somewhere between 5% and 6%. Better than buying iShares National Muni Bond ETF MUB, which didn’t quite make 1%. Not as much as buying iShares iBoxx $ High Yield Corporate Bond ETF HYG and SPDR Bloomberg High Yield Bond ETF JNK would have done, though much more efficient after taxes. Far better than Treasury funds (many of which, like iShares 20+ Year Treasury Bond ETF TLT, had negative returns) and, certainly after tax, beat money market funds.

I always check out what some closed-end fund ETFs are holding, and this year, it became even more important as Saba took on BlackRock BLK and others over discount to NAV’s.

So for 2025, keep closed-end muni funds heavily overweight in your income portion of your portfolio.

What I Don’t Like for 2025

I do not like commodities. While that might seem odd, given one of my favorite choices, I think there are three things weighing on commodity prices this year:

• A potentially shaky economy. Certainly globally, but I also have my doubts about the current state of our own economy (jobs) or how it will perform under the new administration.
• The potential end of the war between Russia and Ukraine. That could rejuvenate the commodity production AND distribution with both countries.
• The concept of “Drill Baby Drill” and a serious domestic effort to extract and process rare earths, critical minerals and commodities in general, that this administration seems to want, will not help commodity prices.

Just to be very clear, I don’t like commodities themselves.

Two/Three Buys for 2025

Maybe the Magnificent Seven and AI and even quantum computing remain market darlings, but that is not where I am putting my biggest allocations in equities.

• Commercial Real Estate.
• Commodity Refining/Extraction/Logistics.
• The “new” chip manufacturers.

Commercial Real Estate (through ETF and direct investments    

Vanguard Real Estate Index Fund ETF Shares VNQ is the main building block, but I will, over the course of the year, identify for myself some individual holdings (my job does not allow me to discuss specific stocks).

• Law and Order. A big part of the premise is the return of “law and order.” Many cities allowed a lot of things that were previously crimes, to go unpunished. I think that is changing, which will make several urban centers more attractive than they have been in years.
• Work From Office. Companies increasingly want it. Some employees even seem to be warming to the idea that at least three days a week in the office is better. Training almost requires an in-office presence. Ironically, a weaker labor market should help get people back into the office, as employers, not employees hold the cards.
• Rates are a risk. I think a 10-year even as high as 5% and only one or two more cuts is OK, if I’m right on the first two points. Rates much higher than that, and I get concerned.

Commodity Refining/Extraction/Logistics

This is quite broad. I will use VanEck Oil Services ETF OIH as part of the position. It is oil services, and while I don’t like the commodities themselves, I think there will be a lot of incentives to increase production and the servicers should do well. 

I will buy a smidge of energy and mining (Energy Select Sector SPDR Fund XLE and SPDR S&P Metals and Mining ETF XME, but only a small portion). I will also put some of this money into VanEck Oil Refiners ETF CRAK (refiners). Global X U.S. Infrastructure Development ETF PAVE will also get an allocation as I think it covers some of the logistics here. 

I may add some uranium names, some specific companies that benefit. This will be an overweight segment in my portfolio, but broadly diversified as it is difficult, at the moment, for me to identify a better, more targeted approach to this broad strategy.

The ”New” Chipmakers

I think, you need to play this with individual stocks. I do think not only will we see money allocated to the chip industry under Trump, it will have fewer strings attached. Since I cannot list individual stocks, I recommend looking for who is building plants in the U.S., that is domestic, and whose stocks have underperformed. 

I do hold and will add more of a company that starts with "I" and ends with "L." It has been a dog, but since I started buying late in the summer, it is OK (was briefly up). This fits my “contrarian” nature and my belief that the Trump administration will do more for the domestic chip industry than their prior administration accomplished (though they tried, at least a little).

Good luck and as always, we will be examining what could derail these core views/positions over the course of the year!

At the time of publication, Tchir owned positions in XLE and individual stocks under the themes he recommends.