How and where to invest? We will review the investments with positive forecasts for this year and the prospects for stock, bonds, and investing in housing.
Above all – What you should take into account with each type of asset or the products that you should choose to invest for the upcoming decade.
Best Financial Investments in 2020
Being selective with your investments has always been important, but in 2020, if possible, much more. After years in which fixed income (bonds and other debt) and also the stock market have accustomed investors to win almost always, we can finally see that the tables have turned.
We saw it in 2018, after all those consecutive years of profits in almost all types of investments, the losses came.
The year 2019 has given some more truce. Although this time, most of the assets registered gains, they have suffered quite a lot from global financial market volatility — Trade wars, the uncertainty of Brexit, and many other events have put investors in numbing suspense.
Therefore, perhaps more important than knowing when to buy is knowing when to sell (or, rather, when not to sell).
The essential thing is that you know your risk profile. Also, everyone who invests this year should keep in mind that volatility (sharp price swings) is the order of the day and should know how to deal with it.
Where to Invest Right Now?
As for the different types of investments, in summary, deposits still have little return. (In fact, on average it is so low that it almost ensures the loss of purchasing power because prices go up more than our savings will rent.)
Low-risk assets such as bonds continue with modest returns because, for now, interest rates remain in the minimum zone.
Meanwhile, experts agree that, despite the fluctuations that are occurring, in the long term and for that part of the heritage that we will not be needed in the short term, the stock market is still the most profitable asset.
And the real estate? There are already analysts who predict that house prices, although they will continue to rise, will not do so so quickly. Another thing is the rent. Later, in the housing section, we tell more about affordable return on real estate investments, both in price and on the rental side.
How to Invest Carefully in 2020
How to do it? More than ever, with great caution and while being very selective, putting yourselves in the hands of an expert if your knowledge is not enough.
That expert can be, from an investment fund manager to a “robot” that selects the best investments for our risk profile (known as Robo-advisors or managed portfolios.
Or go a step beyond – Find a financial advisor who accompanies us all the way and get the most out of your savings.
The year 2020 begins with relative calm. Uncertainties regarding Brexit begin to disappear, as the United Kingdom’s exit from the European Union will be made in an agreed manner. Besides, trade tensions between China and the US seem to relax after the first agreements.
However, other concerns remain on the table, such as the lower growth of large developed economies, which could lead to a recession.
“The symptoms of exhaustion are fueled, leading to the acceptance that the recession is not disposable,” they point out in the Bankinter Investment Strategy Report for 2020.
Therefore, the key is that you are comfortable with the risk you have in your portfolio and that you are clear about your investment horizon. If it is money that you will need in the short term or if on the contrary, you can afford to forget that your investment falls momentarily at the cost of having good returns in the future.
To start, you can discover the level of risk tolerance with this interactive risk investment tolerance questionnaire.
Now that you have had an idea of your risk profile, you can take a look at the percentages recommended by the Bankinter analysis team in its investment strategy for the third quarter of the year.
For example, in the case of the riskiest, they recommend that 70% of the total investment be in the stock market, compared to 15% for the most defensive or conservative.
Here you can see the most important details about investing in the stock market if you are not so familiar with the whole process.
Set the Course Straight and Aim for Profitability
Before concluding the subject, the first thing you should do is make sure that the entity with which you work is properly supervised and complied with all the regulations, so as not to take scares with the most precious thing for you: your savings.
The second thing you should know before asking how to invest in 2020 is to identify the best assets to invest in according to your situation (the stock market, debt, real estate, etc…)
And another thing – the product through which you are going to do so: buy stocks, an investment fund, a quoted fund or ETF, etc …
We will point out some of the facts that might show what will be the best option for you. But basically, if you lack a lot of financial knowledge, you should find a business manager that you can agree with before you risk choosing a couple of wrong shares in the stock market.
If you are thinking about where to invest money to get profitability in 2020, here are the long-term returns of some assets:
For example, monetary and fixed income (more conservative) in the last year are in losses (although at most they are 0.3% on average).
In a term of 10 years, they earn between 0.5% and 2.1% on average, and 20 years have offered returns of between 1.3% and 2.4%.
If we go to higher risk assets, such as mixed funds (they have a fixed income share and a share of the stock market), last year’s returns are not much better, between 0.2% and 0.9%. However, there are falls in many funds of up to 4%.
In the longer term, at 10 years, they earn between 1.4% and more than 2.4%. Pure equity funds are, together with mixed equity, the only ones that are saved from losses in the last year. Besides, their long-term returns are also usually higher (in the previous 10 years of around 2.4%).
Where to Invest in the Stock Market?
No one can truly foresee the future, but one of the safest options, if You do not have the necessary financial knowledge – is to invest in the stock market through an investment fund or a product managed by a professional.
Other investors prefer to go for higher dividends to ensure periodic income or directly look at which companies are including the best managers in their portfolios or even significant gurus like Warren Buffett.
And, the most experienced, they use their own analysis or the recommendations of the consensus of analysts.
Ratios such as the PER (Price-earnings ratio) to know if an action is expensive or cheap in the stock market (remember that because you see a stock fall price does not necessarily mean that it is economical in terms of investment).
Before you continue reading, Watch out if you decide to settle with stocks just because the best-known managers or investors do so. They have a diversified portfolio with many other values, and you probably may not have that capacity. Here you can check the different types of investment strategies that exist.
You can also use the valuations carried out by investment firm analysts. Some services such as Bloomberg or FactSet offer the average valuation that the market consensus considers for any action.
Real Estate Investing In 2020
As for the housing market, real estate investing in 2020 is back in fashion and on everyone’s lips but also on your neighbors. The purchase, sale, and rental prices have been rising progressively, although it is true that in recent months they have begun to moderate (especially in the case of the sale).
But what profitability can you get out of a house? On the one hand, the data of the Federal Reserve say that the profitability of the house stood at 8.5% in the third quarter of 2019, and the profitability that you can get by renting was around 3.8%.
Here you can see a list of different simulators and calculators on housing. For example, if you want to know if it is worth buying a house to rent or what home you can afford to buy. How to calculate the profitability of the rent?
The global market is dynamic and subject to constant changes.
What is valid today, conditions may change unpredictably in the future.
Being attentive to these changes is essential, especially to help us make better decisions to invest in the upcoming decade. Developing an investment strategy is paramount since it will be our lifesaver in this adverse financial environment.
If it is difficult for you to define a clear strategy, going to an independent financial advisor may be one of the most fruitful alternatives.
We sincerely hope that the information provided in this article will be of some use for your future financial decisions and that you will enter the upcoming decade fewer worries about the status of your bank account.