Although the year 2020 was the hardest challenge of the decade for the world’s economy, individual investing remains a fine thing for growing wealth and protecting assets. However, successful investing is hardly possible without adaptation to the latest market trends and the adoption of fresh investment ideas by experts in the field. Below is the guide to investment ideas that can help you keep growing your wealth in 2021.
First of all, you should understand that it’s still possible to enter the investment market with a small sum of money in 2021. Still, it’s impossible to get rich quick, and you shouldn’t believe anyone who insists on the opposite. High profits in the short term are possible only for the riskiest financial vehicles and only if you are ready to sacrifice large amounts of money, knowing that the chances to lose them are higher than to earn something. If you want to grow your wealth with minimal risks in 2021, you should stick to the investment ideas described below. They might be familiar to you, but it doesn’t diminish their efficiency.
Another important thing to understand is that investing in one or two financial vehicles is rarely a good strategy. The best way is to use the benefits of a reasonably diversified portfolio to keep the positive wealth-growing dynamic most of the time.
You can argue that savings accounts cannot grow an investment due to high inflation that can minimize or even ‘eat’ your return. You will be totally right as savings accounts are the worst way to invest your money. On the other hand, the opportunity to get your interest return is a positive aspect that prevents your uninvested savings from burning as quickly as they could under your mattress.
This simple truth makes savings accounts really useful when you want to stockpile a particular amount of money with negligible risks and use them to increment other investments and emergencies without touching those investments that generate tangible income. Don’t ditch savings accounts to let your uninvested savings fight inflation, at least somehow.
Commodities are another option to save your assets. Physical commodities include items that you can earn in real life, such as gold and silver. This type of investment is usually considered one of the safest ways to protect a part of your assets during tough economic times. The prices for these and other commodities rely on supply and demand, which is hardly predictable. Still, the historical average return is quite consistent, and positive years usually balance out negative periods. Considering inflation, an investment in commodities can keep bringing you around 2%-3% in a long-term perspective and give extra protection against inflation for the rest of your portfolio.
Investing in bonds actually means loaning some money to some company or the government. In the US, government bonds are the most popular on the internal bond market. You are free to purchase foreign bonds too. The bond issuer will later pay you interest during the agreed lifespan of the ‘loan.’ This investment option is not considered as ‘risky’ as, say, stocks or online CFDs, but the returns are also much lower. So why do you need bonds on your 2021 portfolio? Because it’s a good way to balance out risks, minimize potential losses, or earn around 5-6% per year.
A Contract for Differences is a kind of a financial contract that lets you gain income if the difference on the purchased items is positive when the trades are closing. Online CFDs let you trade over very short periods and use levers to multiply your gains, depending on the conditions. This investment instrument is considered one of the riskiest (along with the stocks) but can be a great source of income for an experienced trader. It’s recommended to try CFDs in 2021 only if you have an opportunity to sacrifice an amount of cash without hurting your savings and the rest of the investment portfolio.
Tock market lets you purchase and operate single stocks, while mutual funds provide you with a bunch of stocks per single purchase. However, all mutual funds are formed and controlled by a manager who charges a certain percentage as an investment fee. This fee can make it difficult or even impossible to beat the market.
Still, the average return of 2020 mutual funds in different categories was roughly 10%, which is quite good for investment under commissions. Analytics say that this return percentage is about to remain an industry standard for 2021.
The stock market is the most common and usually the most beneficial financial machine. It’s one of the riskiest ones, too, anyway. Purchasing a stock, you become a legal owner of a small portion of a company that sold you its stock. If the company earns profits, it may pay you dividends or reinvest the entire profit into further development. In both cases, the stock you own can grow in price or lose value, depending on the business solutions the company makes. The historical average of stock market returns is 10% but can fluctuate from 9% to 14%, depending on the characteristics of your portfolio.
Let’s take a look at a simple example to understand how important it is to balance out your portfolio and manage risks properly. If you invest $10,000 at 10% for 50 years without reinvesting, you can get $1,173,908. If you invest at 20%, it may turn into a whopping $91,004,381. Unfortunately, it’s highly unlikely to happen because of the extreme risk levels of such high-grossing instruments. In 2021 and after, the best idea will be to focus on reaching the annual market average and celebrate if you manage to gain more with balanced risks and without losing the increment along with the next year’s losses. Keep your finger on the pulse of market trends and stick to the well-researched and at least more or less predictable instruments.