Crush the Stock Market in 2026 With These 5 Investing Strategies (Hint: They’re Simple).

Heading into any period of uncertainty (which I’d argue can basically account for any period in the future investors have reason to believe could be worse than the prior), 2026 will undoubtedly be an interesting year for traders and investors. I think this coming year could be one which provides more volatility than we’ve seen in some time. My simplistic thesis behind why this may be the case stems from the uncertain impacts AI technology, quantum computing, and other breakthroughs will have on the economy. 

Right now, most in the market are excited about the potential efficiency-generating positive impacts of AI. To be honest, this is an incredible technology, and there’s something to this thesis.

However, I’m also not blind to the idea that the market may start to look for a return on investment from many of these key Capex investments among the largest tech giants, many of whom have been driving the market higher in recent years. 

So, with that said, let’s dive into five investing strategies that may be worth considering as we turn the page to a new year. 

Be Selective With AI Picks

I think artificial intelligence technology will certainly be the next Industrial Revolution, in a similar way to what the internet did to revolutionize our society into what it is today. A generation or two ago, the world was not dominated by computers. A decade or two from now, it’s going to be hard to fathom a world in which AI is not available to take care of most of our information needs. 

That said, it will be interesting to see if 2026 bring sabot uncertainty around how easy the gains from AI exposure will be. The question is whether there will be winners among enablers and deployers, rather than hype-driven infrastructure stocks and those in more niche areas of this space. During the dot-com implosion, most of the internet stocks that went bust the fastest had little in the way of new ideas. These companies just added a “.com” to their names, and rode the hype-driven momentum higher.

I’m not saying I’m expecting a crash to the same degree as what we saw more than a quarter century ago. But what I am saying is that market participants may become more discriminating with their investment choices, and those companies in the AI space that are the most efficient could see the greatest gains. In other words, I think being a stock picker could be a good thing in 2026. 

Quality and Yield Will Be In Focus

In this more skeptical light, I do think investors will start to parse through companies more closely. Those with rock-solid balance sheets and the best-quality earnings and cash flows may outperform those companies which are still struggling to make profits. 

If quality once again reigns supreme, that’s going to be bad news for many of the unprofitable companies in sectors that may not have as high a growth rate that was priced in. But if we do see a material slowdown in spending among such stocks, and that portends for a wider market decline, I do think dividend stocks and fixed income could have their place in the sun.

I think owning a well-diversified portfolio which includes some dividend paying stocks (or ETFs tracking this trend) is a good idea. If interest rates do come down as central banks continue to attempt to stick this soft landing, these securities could have an extra boost which could provide outperformance relative to many of the larger growth stocks many have come to believe will head higher forever. Diversification can be investors’ best friends right now (more on that later).

Defensive Growth Could Be Where It’s At

That said, for investors who are looking to stay invested in top growth stocks, I think low-beta (low-correlation) growth stocks with mature business models and entrenched moats may be the ones to outperform the smaller (and typically higher-growth) stocks which have dominated the tech industry of late.

Plenty of new AI companies are getting snapped up, and the industry is consolidating. But there are plenty of other industries that have already been mostly consolidated I think can provide potentially better value. Looking at putting some capital to work in the utilities sector, for example, may be worthwhile. The Vanguard Utilities Index Fund ETF (VPU) is one of my top picks in this regard.

That’s because utility companies tend to produce strong earnings and cash flow growth, regardless of the economic climate. But with electricity usage poised to take off, this is a sector I think can be an indirect beneficiary of these trends, and one many are sleeping on right now.

Global Diversification Could Matter More Than Ever

Another key trend I think could play out in 2026 is a shift from U.S.-centric growth strategies to portfolios which are focused on the best the world has to offer. If we see continued fluctuations in global currency markets and geopolitical risks play out (mainly from U.S. trade policy, but increasingly related to military operations of late), and we see improving economic indicators out of other major developed economies, investors who are all-in on the U.S. stock market could miss out on broader gains. 

I’m of the view that the higher-growth and robust economies of many emerging markets could become more attractive than they have been in some time. Much of this thesis has to do around how much cheaper on a relative basis companies in these markets are.

And while I just said investors are likely to pay up for quality (and I believe that to be true), I also think a return of value investing could mean significant upside for investors who are looking outside the box. 

Some Cash Position Is Probably Going to Be Helpful

If you’re thinking along similar lines as I (in that we could see some significant market volatility in the year ahead which could provide a meaningful buying opportunity), then having a large enough cash position to take advantage of these ebbs and flows in the market may be a superpower. 

I’m of the view that having a solid cash position in any market is a good idea. That’s the buffer investors and traders have to work with. If an opportunity arises, the ability to avoid going on margin to put on specific trades or add to positions before one’s transfers take effect can have a meaningful impact on overall performance. 

As such, I’m of the view that having such a cash position, and potentially implementing strategic option-based hedges, could be worthwhile for many investors. Of course, hedges are just insurance (and just like at the blackjack table, it’s generally a losing bet over a long enough period of time). But as a way to remove short-term noise from one’s portfolio (and to help many sleep better at night), such strategies can be worthwhile if one expects significant volatility ahead.