Girl works with 3D printer

Deciding which stock to buy is a little like choosing where to eat dinner.

You could go with a tried-and-true favorite, like the Italian place around the corner that has THE BEST spaghetti carbonara. Or … you could take a gamble on the trendy new place all your friends are talking about. (CBD-infused cocktails, anyone?)

As in life, investing fads come and go. Right now some trendy stock sectors are heating up and making their mark on the markets. But should you buy in?

Well, it’s not as easy as yes or no, but, if you’re curious about these new stock sectors, we can shed some light on a few of them—we’re not endorsing investments in these categories, but we do want to help you stay informed!

1. Artificial Intelligence

Artificial intelligence (and its cousins: robotics and machine learning) is making headlines as more industries capitalize on the possibilities of automation. Health care, real estate, car manufacturing, and financial services are just a few of the sectors that are beginning to tap into AI’s possibilities.

Over the next decade, the AI market is projected to grow to $15.7 trillion, so it’s a stock category that appears to have real staying power. The risk to investors is determining which stocks have the most potential to perform well over the long term.

One potential way to balance that risk is by investing in companies that are investing in AI, versus buying up AI stocks directly. Microsoft, Amazon, and IBM, for example, are some of the heavy hitters who are using AI and machine learning to develop innovative products and services.

2. Cannabis

Cannabis stocks are surging, thanks to the legalization of marijuana for recreational use in Canada in 2018 — and to a much lesser extent, the legalization for recreational and medicinal purposes in some U.S. states. If you are thinking about investing in cannabis stocks, be sure to do your research and stay up-to-date on the changing regulations around cannabis.

Cannabis exchange-traded funds (ETFs), which are mutual funds that trade like a stock, appeal to buy-and-hold investors. Individual marijuana stocks, though potentially more volatile, could yield better performance for the short-term investor.

The key, whether you’re buying individual cannabis stocks or ETFs, is making sure you’re diversified to manage risk according to your goals. Holding a mix of newer and more established cannabis companies, for instance, can help with that. And again, investors need to watch out for regulatory changes that could affect the cannabis industry as a whole.

3. Cryptocurrency

Cryptocurrency has been something of a mixed bag for investors, reaching dazzling heights and experiencing some staggering lows. Bitcoin, for example, lost 80% of its value in 2018, only to return 176% to investors in the first half of 2019 — these extreme ups and downs make cryptocurrency an enormously volatile investment.

Facebook announced it would develop its own cryptocurrency, called Libra, which is a show of confidence in the sector. Whether crypto will stick around is still a question mark. Its biggest challenges? Lack of regulation, price fluctuations, and usability. Not to mention, it’s not the easiest concept to wrap your head around. Investors should keep in mind that while it has high return potential, cryptocurrency is also extremely (read: extremely) high-risk.

4. 3D Printing

3D printing is growing rapidly and is set to disrupt the manufacturing industry on a large-scale. How quickly 3D printing stocks are able to grow depends largely on the balance between supply for printing materials and demand for the end products.

Over the last decade or so, established 3D printing companies have faltered, largely owing to overvaluation and oversaturation in the industrial market. But it’s the next-gen operations that investors may want to watch.

For example, companies like Carbon are establishing new 3D printing processes that are designed to be more efficient. As more innovators emerge, this trendy stock sector may end up being a watch and wait play for investors.

5. Software-as-a-Service (SaaS)

Software-as-a-Service refers to the delivery of computer software online, without requiring any type of physical product. Software vendors host the servers where the software lives. It’s a technology that falls under the broader umbrella of cloud computing, which is also hot right now.

Any time you’re talking stocks, tech and computing feature heavily in the conversation and SaaS stocks are making a quiet bid for dominance. Through the first half of 2019, software stocks were up nearly 50%. There’s still plenty of room for growth as more companies adopt cloud computing and SaaS solutions to streamline their operations.

In terms of risk, SaaS is still growing and as such, it’s more sensitive to market fluctuations, particularly if a stock is deemed to be overvalued. Something else to take note of in this category is that many of the newer SaaS companies are still getting established and may not be turning a profit yet. Those companies could end up being a flop in your portfolio if the market turns super volatile or a recession hits.

How can you invest in the latest stock trends?

If you’re sold on software-as-a-service or curious about cannabis, the next step is to decide how to invest in those stock trends. A self directed portfolio, like one from Ally Invest, allows you to pick and choose which stocks or mutual funds you’d like to invest in.

Just remember: As you explore new investment sectors, do your research to stay informed, especially when it comes to high-risk categories. Like the spot-on spaghetti carbonara at your favorite restaurant, traditional investment categories are more likely to have predictable results on your portfolio. But you could discover different kinds of returns by shaking things up a little bit and investing in a new stock category.

And if jumping on the next investing trend is too stressful, take a look at a Robo Portfolio from Ally Invest. With a minimum deposit of just $100, you can leave investing to a professional team and have more time to research the next hot dinner spot.

Open a Self-Directed Trading account with Ally Invest