What are the top ways to invest in 2021? Well since we are approaching the end of 2020 I thought it would be a good time to look forward and see what is going to be profitable for your wealth goals in the next 12 months.
It’s important to note that this is not intended to be a predictive post, rather it is a look at what could be worth your attention over the next 12 months.
When it comes to making money, investing as you know is my preferred way for people to generate long term financial security. However, a lot of people that get into investing are unsure of what they can invest in to start making money securely.
Although investing can be a great way to make money it is usually a long term and patient process. So it’s not something you can just do once and expect results overnight. This is often a reason people don’t even start, weird heh?
You also need to bear in mind that your money is always at risk when investing. Yes your investments can also go down, meaning you have the potential to lose money. However, understanding what you are doing and following some simple processes means you can manage risk to acceptable levels. One of these processes is to do your research of what you are investing in and make sure you are happy with what you are doing before sinking your money into it. Sounds straight forward, right?
If you are someone that is interested in investing and trying to make money through investing but you are unsure what the top things to try investing in are then hopefully these few tips will give you an idea and understanding to get started.
So let’s take a look at what asset classes you should be looking at in the coming 12 months.
Best Ways to Invest: 4 Asset Classes to Consider
If you have followed The Investor’s Way for any length of time, you will probably already know what I am going to say are the top asset classes for you to invest in. But stay with me, because there is something new about what I am including for the next 12 months that might surprise you.
One of the investment opportunities that is most popular is the stock market. As you know, a stock investment can be either a direct or indirect investment.
A direct investment is where you can purchase a share of the ownership of a specific company, such as Apple, Microsoft, Facebook or the big banks in your local market.
An indirect investment is where you purchase an Exchange Traded Fund or ETF where you are buying an exposure to an entire index that includes each of the companies that make up the particular index.
Stock markets have recovered from the shock of the pandemic in recent months and are now at or near all time highs. This would seem counter intuitive when profits are under extreme pressure from lockdowns and travel restrictions. But defying logic has become the new norm in stock markets around the world.
With a change in leadership in the US in 2021 and a vaccine being rolled out, the number one ingredient for stock markets rising is returning, confidence! As confidence surges, prices will rise. So in 2021, the stock market is likely to continue to be a good place to put your investing dollars.
Now before you think I’ve lost my marbles, there is also every chance that there will be some form of shock during the year where the market drops dramatically. But since we are long term investors, we will ride that out and just keep building our portfolios.
Another great way to invest your money is in the property market where you can purchase properties and either do them up and resell them or rent them out for more than the mortgage to make passive income.
Property investment is great to make a quick turnover profit if you can renovate and flip the property quickly. This has become a popular method in recent years with the increasing number of television shows that show people how to do it. The caution I provide is that the television shows make it look a lot easier than it is in reality, so be careful.
Now the next surprising thing that we are seeing in the property market, especially here in Australia, is the rapidly increasing prices that are being seen in some markets since the relief of restrictions from the pandemic.
I have to say it has surprised me to see how quickly prices are moving. To extent I suspect it is a result of demand that wasn’t met during the harshest period of the restrictions. This pent up demand is now hitting the market and with supply less than normal, prices are moving quickly.
I suspect this will continue into 2021 as we were already on an upward trajectory prior to the pandemic, so this will likely continue into 2021. Again, the caution with property will be to watch what happens when Government support ceases. Will the banks still be accommodating those that are struggling with their mortgage?
If there is a rise in defaults, I think there will be a period of time where prices slow slightly to absorb the extra supply, which could be offered at distressed prices. By that I mean if banks start selling peoples homes because of defaults, prices will be softer, so it could slow price growth while the supply is soaked up.
Now that is a massive hedge of my opinion, but my overriding view is that property will be a positive contributor to your portfolio in 2021, and as always is an asset class that should be in your portfolio when you can manage it.
Now stay with me here. I know interest rates are very low and the attraction of bonds is limited.
However, if you are looking for somewhere to park some cash for the long term, then bonds are always an option.
One of the more popular bonds in recent times have been residential mortgage backed securities or RMBS. Effectively these are bonds that are backed by residential mortgages, so they provided a higher return.
If you find yourself asking what is a RMBS then check out this link for more detail.
Normally a bond investment is for those investors who have larger portfolios and want to have some of their portfolio allocated to cash.
In 2021 there is good reason, refer to my caution notes above, for why larger investors may want to be in bonds. It’s simply a risk management strategy.
So here is the surprise when it comes to my view on asset classes. Until now I have stayed away from the cryptocurrency market. However, while I remain cautious, I thought it hard to ignore this category when considering what to look at in 2021.
I have had a number of readers ask about cryptocurrency, so I thought I should add them in for completeness purposes. And because there are some interesting things happening in this market that are worth considering in 2021.
Cryptocurrency is quickly becoming the most popular modern investment opportunity, You only need to spend a few minutes on social media to see how many people are spruiking crypto schemes, which is why I have been so cautious, there are some real sharks in this market, so be very careful.
Cryptocurrency trading is making huge waves in investing and this link is to someone who I respect when it comes to defining the merits of this new asset class.
Since I haven’t talked about it much before, here are some basics to consider first.
Cryptocurrency is a currency that is used online for a variety of things, buying, app development and banking to name a few. Effectively it is a new form of money.
All cryptocurrencies are different in value with the major three being Bitcoin, Ethereum and Ripple. They are the ones that tend to be invested in the most and have the best chance at a return on your investment.
They are a lot like stocks where you purchase an allocation of crypto and the cost will rise and fall depending on demand and what the crypto owners are doing with it.
What is interesting with the crypto market is that Bitcoin has returned to all time high levels. And one of the things you will know about my investing style, is that all time highs are a great place to invest. Sounds strange, but remember we are talking about an emotional market.
When a stock or crypto is at all time highs, it means there is nobody losing money, so there is less selling pressure and more people jumping in hoping not to suffer FOMO. As a result, prices rise quickly.
So without getting too carried away, 2021 could be a good year to add some crypto to your portfolio. Just note however, that it is a much younger market and subject to massive fluctuations. For those that like a bit of a more wild ride, this could be a place to put an allocation of your money in 2021.
If you are looking to start investing and you are unsure where to start, then hopefully these few options will give you an idea of what you can invest in to get started.
While these are just some guiding thoughts on what might happen in the next 12 months, I recommend you consider each of these asset classes and determine where you might add to your portfolio in 2021.
Remember, the strategy we promote at The Investor’s Way is to be consistently adding to your portfolio for the long term and avoid getting caught up with chasing what the talking heads suggest is going to be the best investment.
To take the risk down a notch and to manage for the long term, just keep adding each month to your portfolio. If you are looking to add property, keep building up your cash for the deposit and costs or look at other ways to get into property if the initial outlay is too large for now.
And remember, the opportunity to access Investing Bootcamp before prices go up in the new year is still available for a short time. Click here to join the program that shows you exactly how to build a portfolio, how to invest in each of the asset classes, and how to select an investment that will grow over time and reduce your risk.