Seasoned investors often approach markets with a long-term view, using short- and medium-term volatility to buy into the themes they believe will profit over many years. While identifying these trends is difficult, tuning out the noise can help you focus your portfolio on the winners, possibly resulting in significant gains.

Here are five of the most popular trends right now — including several themes showing significant growth potential in the fourth quarter and beyond.

1. Generative artificial intelligence

Across industries, data scientists are exploring how to tap into artificial intelligence‘s (AI) power, from designing surgical assistants to developing tools that identify deforestation hotspots in the Amazon rainforest.

With the arrival of generative AI, a subset of the broader technology, the pace of digital innovation has quickly accelerated. Gen AI relies on vast amounts of text to create new content in seconds, including poetry, art, music, videos and more.

In business, generative AI can enhance human creativity and productivity, transforming how we work. That’s why industry experts believe that gen AI’s arrival could be as significant as the internet. McKinsey Digital estimates that generative AI could increase global corporate profits by $4.4 trillion annually.

For investors looking to get in on the action, exchange-traded funds (ETFs) offer an efficient and easy way to invest in AI companies, giving you exposure without buying individual stocks. Here are three to consider: Global X Robotics & Artificial Intelligence ETF (BOTZ), ARK Autonomous Technology & Robotics ETF (ARKQ), and ROBO Global Robotics and Automation ETF (ROBO).

2. Small-cap stocks

High-profile large-cap tech stocks such as NVIDIA and Microsoft got all the attention in 2023, as they drove the Nasdaq and S&P 500 indexes to new highs through much of the year. While investors scrambled to own these momentum stocks, they mostly shunned small-cap stocks, leading to a lackluster performance from these smaller companies.

Now with more attractive relative valuations, small-cap stocks have taken investors’ interest again, with many bouncing off their 2023 lows. Some of the best small-cap stocks offer high growth and attractive markets, even if they don’t have the deep pockets and established markets of the large caps. So investors are again looking into these lesser-known names for opportunity.

Investing in individual small caps requires a long-term perspective and a lot of research work to understand the industry and the opportunity. Plus, small-caps tend to be riskier than larger companies, since they just don’t have the same level of resources. So investors looking to ride the small-cap wave may be well-served by buying some of the best small-cap ETFs instead.

3. High interest rates

When interest rates were near zero, most people got used to earning nothing on their savings and short-term investments. But now, many high-yield savings accounts and certificates of deposit (CDs) offer returns above 5 percent. Likewise, yields on Treasury bills have jumped to multi-year highs, prompting investors to turn their attention again to fixed income.

Like any other investment, deciding on the best fixed-income assets depends on your financial situation and goals. For example, income from bonds issued by the federal government might be exempt from state and local taxes, resulting in significant savings for those living in states with the highest taxes.

There are also other investment strategies like building CD ladders where you put chunks of money into separate CDs with different maturity durations, like six months, one year, and two years. Doing this allows you to lessen reinvestment risk. However, now may be a good time to lock in longer-term yields, given that interest rates seem to have hit a plateau..

Before choosing fixed-income investments, consult with your financial advisor. And if you don’t have one, we’ve compiled a handy guide to help you with your search.

4. REITs

While interest rates are high now, investors are anticipating them to decline substantially in the year ahead. And this means that sectors that have been hurt by higher rates, such as real estate investment trusts (REITs), may be poised for a rebound in the year ahead as rates fall.

REITs offer the ability to own real estate without all the headaches of actually managing it yourself. REITs enjoy significant tax advantages, most notably the ability to avoid tax at the corporate level in exchange for paying out most of their income as dividends. So REITs often offer among the highest dividends of any industry.

Publicly traded REITs are among the best types of REITs to invest in, because they offer high yields, low overall management costs and the scrutiny of public investors. As mentioned, with interest rates likely to fall in the short to medium term, a key cost for REITs is poised to fall, too.

Those looking to own a fund instead of digging into the details of individual REITs should check out the best REIT ETFs and be sure to avoid some of the worst REIT investing mistakes.

5. Cash is king

With myriad challenges weighing on the market – including global tensions connected to the Hamas-Israel war, the ongoing Russia-Ukraine war, and elevated oil prices – many investors feel on edge. Closer to home, prolonged inflation, a $1.7 trillion deficit in fiscal 2023, and ballooning student loan debt add to the concerns.

In response, investors are finding comfort in cash. Global money market funds received massive inflows as 2023 progressed. As of Dec. 1, 2023, U.S. money market funds held a record $6.3 trillion in assets, according to the Office of Financial Research.

Billionaire hedge fund managers Ray Dalio and Paul Tudor Jones have taken a similar stance, seeing cash as a safe investment vehicle amid rising rates.

As individuals and institutions reconsider their investment strategies, cash is once again king, offering liquidity and stability in turbulent times.

Bottom line

While these five investing trends offer the promise of outsized returns in the years to come, nothing is fully guaranteed in investing. You may want to consult with a financial advisor before making any investment decisions.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.