Top Investments to Consider in 2020
- Posted on December 29, 2019
- Editors Pick
- By admin
The year is
fast coming to an end. If you haven’t considered investing before or would like
to take even more advantage of making better investments, then now is the time
to get all the right ideas and knowledge that would help you shape your
finances in the new year.
When it
comes to investing, a lot of people invest to make extra profit for many
reasons—education, mortgage, wedding, vacation, etc., whatever the reason is
the major purpose of investing is to create wealth. Compared to simply having a
savings investing your money in a profitable venture helps you put your money
to work and earn interests by the end of the investment tenure.
Luckily,
there are many profitable platforms to invest your money in such as stocks,
mutual funds, bonds, real estate, retailing, precious metals, and the likes.
Why Invest?
There are a
thousand and one reasons to invest such as financial security or providing
another source of income, but here’s one nice reason: to generate wealth.
Through investing you have the opportunity of putting your money into
profitable investment vehicles with high potentials of a good return rate.
Notwithstanding, in investing lies the probability of losing your money if not
done wisely. However, investing still holds lots of benefits some of which are:
●
Making your money grow over time; this has to be the deal with
investing. It lets you put your money away for a stipulated time and your money
back with interests when due. For starters, most companies offer investors a
10% ROI (return on investment) annually. The best way to let your money grow in
investment is to opt for long-term investing.
●
Having a good retirement fund plan. Retirement would no longer be
an issue of concern with investing. Consider it as a gift from the younger you
to the older you by putting away some money in an investment vehicle and living
off the returns when you’re retired. There are several firms that offer
retirement plan services.
Another way to plan retirement funds can be through
stocks, bonds, or precious metals. Whichever you decide to go with, ensure that
it is worthy enough to last a very long while.
●
Funding or expanding your business. There are many ways to fund a
business—crowdfunding, grants, loans, etc. Investing is also a good way to
singly fund or expand your business. On the other hand, the secret to most
successful businesses is not only making other investments elsewhere but also
pouring the investment returns into their own businesses.
It is simply
not enough to merely invest in a venture, having clearly defined investment
goals would help you count the costs of your investment. Counting the costs
includes calculating the possible risks and your willingness to still invest.
It also includes deciding the amount you would like to invest based on your net
income and your financial foundation. That is, no outstanding debts and having
an emergency fund back up elsewhere. Basically, having your finances planned
out in such a way that the money you decide to invest or put away does not
affect your overall financial health.
Other
reasons for investing include;
●
Funding your education
●
Portfolio diversification
●
Saving on pretax (lower your taxable income)
●
Starting or cofounding a new venture
Investments to Consider in 2020
To encourage
investing among Americans and foreigners resident in America, the U.S.
government under the Department of Commerce (International Trade
Administration) initiated ‘Invest in America’ on March 7, 2007. The
initiative’s mission is “to promote the United States as a destination for
inward direct investment, also known as foreign direct investment.” This
initiative is beneficial to large companies, large investors, foreign
investors, and low-income investors likewise, as it ensures that public-traded
companies meet up to certain requirements that make their businesses profitable
and investment-worthy.
#1: Stock market
Investing in the stock market offers a lot of
advantages such as investment gains, diversification, part ownership, and
dividend income to its investors though it also comes with its few
disadvantages. High investment amounts and long-term investment tenure have
more potentials of fetching greater returns. Though stock investment may not be
as “juicy” as the news makes it, it still holds a lot of benefits if done properly.
The major issue with investing in stocks usually has to do with individual
emotions—the internal battle between whether to hold shares or sell them. It
also has to do with greed or fear of the investors.
Mitchel
Bloom, author of The 8 Biggest 401(k) Mistakes
and How to Avoid Them, captures
the emotional concern of stock investing as “emotions can hinder a good
investment plan in good market environments, whether you’re experiencing a bull
run where the markets are up, or a bear market where the markets are off 20% or
more from their highs.
The
emotional aspect of stock investing has caused quite a few investors to take up
a dollar-cost averaging as a means of investing. That way, they contribute a
particular amount of money every month which places them at an advantage when
the prices decrease.
In late 2018, global markets experienced a
free fall until a change occurred which caused some indexes to hit all-time
highs in late December 2018. The U.S. stock market has proven to be a reliable
investment vehicle. As 2019 comes to a close there has been a 24.2% increase in
the S&P 500 index SPX +0.06%, and a
28.6% increase in the Nasdaq Composite Index COMP
-0.15%. An impressive performance that can only be matched by
high-performance markets such as Russia and Romania which gained over 30%
increase by the close of the year. In the last decade, the U.S. stock market
has operated a bull market and has remained one of the top global markets.
The best way
to get the most out of the stock market is by first getting a good knowledge of
how the market works and studying past trading patterns to know when to buy and
sell shares. If you’d rather not buy individual stocks you can opt for low-cost
index funds. Another way of getting the best out of stock investing is by
increasing the amount of money in your 401(k) which in turn decreases your
taxable income and generates more wealth for you. Your taxable income can yet
be reduced by investing after-tax dollars in Roth IRA which accepts up to
$6,000 while the 401(k) accepts up to $19,000
#2: Real Estate
The next most profitable investment option
after the stock market would be real estate. “Real estate investing involves the ownership, management, rental and/or sale of real
estate for profit. Improvement of realty property as part of real estate
investment strategy is generally considered to be a sub-specialty of real
estate investing called real estate development.” Investing in real estate is a
great way to diversify your portfolio asides stocks and bonds.
Real estate
offers investment opportunities to both high-income and low-income individuals.
Most real estate investors would rather invest through real estate development
trusts (REITs) than own actual real estate assets or properties. However, the
returns gotten from REITs cannot be compared to the returns gotten from owning
actual properties. Investing through REITs is recommended for new investors
especially low-funds investors. Similar to stock investing, REIT investing
allows investors to directly invest in commercial real estate by buying stocks
of the REITs and earn income. The investors also receive dividends. There is no
one particular real estate option for REITs as some REITs invest in mortgages
and property while others simply invest in apartment complexes, office
buildings, retail stores, or warehouses. In as much as REITs specialty differs,
some experts have stated that it is not ideal for novice investors to opt for
the REITs that offer mortgage investing because of their “volatility and they
are not as easy to understand.” Besides REITs, investors can also consider
investing through mutual funds or equity trust funds (ETFs) which are mostly
done through brokerages.
Still, if
you would still like to invest in real estate without getting involved in all
the big investment stuff, you can stick to other options such as renting out a
room in your home or wherever (so long as you own it), buy a rental property,
or crowdfund a real estate investment with other investors and split the
profits.
#3: Agriculture
Studies have indicated that agriculture
investing is a low-risk investment that increases in value over time and most
likely not affected by the recession. Like most contemporary investment
opportunities, agriculture investing provides its investors with options, you
can either own an actual farm, invest via farm REITs or simply crowdfund a farm
and split the returns when due. Farm REITs operate by purchasing farmlands and
leasing them out to farmers. Similar to conventional REITs, through farm REITs
agriculture investors can co-own farms without doing all the ‘dirty work”.
Investing through farm REITs offers the investor many benefits such as partly owning
a farm, and diversification which can come about by investing in multiple farms
at the same time. Another benefit of this investment is its high liquidity as
investors can sell their shares on stock exchanges. The minimum investment
amount is one REIT share.
Another way
to invest in agriculture without owning a farm is through mutual funds. Mutual
funds agriculture investment is majorly divided into two—direct farming and
agricultural produce. Some mutual funds firms specialize in funding the farming
process while others specialize in funding the preservation, distribution, and
production aspect of agriculture. The options of agriculture investing are
diverse as investors can yet opt for investing in farmers through equity or
ETFs.
The benefits
of investing in agriculture include:
●
High yield/ returns
●
Principal pay down
●
Increased value through forced equity
●
Land appreciation over time
#4: Peer-to-Peer Lending
If investing
in stocks or real estate doesn’t interest you, peer-to-peer lending is another lucrative investment vehicle. Just like traditional banks, you can loan money
to individuals through lending platforms and receive an interest in return. The
interest rates can 5% and more, depending on the amount you are lending and the
risks involved in the investment. Different lending platforms offer different
investing amounts; some go as low as $25 yet an amount that low wouldn’t fetch
you so much interest unless it’s multiple investments. Other platforms take
$1000 as the starting amount. Also, the lending platforms are sometimes
restricted or operational in only selected jurisdictions. They only operate
where their primary markets are, so, if considering this type of investment,
you may want to look for licensed lending platforms operational in your state.
#5: Your business
Every good business person and investor
understands that the best type of investment is investing in your business as
well. Perhaps you do not have a business or a company, but you have a
side-hustle or career. Every business needs to grow to become successful and to
generate more revenues. The growth and success of your business not only
depends on customer patronage but also the investment you put into it (funds
and time). You have to spend money to make money. Investing in your business
can take up any form whether it funds, extra time, outsourcing tasks, or hiring
the best instructors to train your employees whatever extra efforts you put
into making your business successful is an investment. Another perk about
investing in your business is that it opens the door to other investors. No one
wants to put their money on a ground that isn’t fertile. Except for a few
philanthropic investors who aren’t really interested in your money per se but
majorly interested in seeing your business grow, most investors would only
invest in a venture that would fetch them good money at the due time.
Other investments to consider in 2020
●
Money market
●
Certificate of deposit
●
Treasury securities
●
Municipal bond funds
●
Short-term corporate bond funds
●
Government bond funds
●
Savings account
●
S&P 500 index fund
●
Nasdaq 100 index fund
●
Growth stock funds
Companies to consider investing in
●
Amazon.com
●
Netflix
●
Google
●
Berkshire Hathaway
●
The Walt Disney Company
●
Apple
●
Tesla Motors
●
Toyota Motor Corporation
●
Pepsi
●
Starbucks
Investing is a great way to generate extra income and build wealth over time. As more companies and businesses emerge investors are opportune with a wide investment scope. Every investment has its risks and returns rates which may differ from company to company due to the nature of the business, as an investor it would only be wise to run a quick check on the companies you would like to invest in to study their financial patterns over time before committing your money. If you were not so sure about investing before, now is the right time to start.
Investingport owns Berkshire stocks, Amazon stocks, and Disney.
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