The next year is going to be highly uncertain and nothing seems to be very clear or obvious to anyone. The stock markets around the world are reaching their all-time highs but at the same time the GDP numbers have dropped and do not match up to the gains in the stock market.
While economists have been fretting about the likely scenario of economic recession in 2020, here’s a few investment tips that can be useful to make this your year:-
Wealth creation is key
Wealth creation is key to bridging the gap between your current situation and your goals. Ultimately, it’s the wealth creation that really matters. In the case of debts, they can only give security but not generate wealth for you.
The tip here is to focus on the power of equities and equity mutual funds.
The balance between saving and investing
The discipline of saving and investing is perhaps the most important tip one needs to consider as they go investing in 2020. Preparing a budget, sticking to the expenses, monitoring the savings and using the savings wisely during investing is the most basic yet the most important part of the success journey of an investor.
It’s never too late or too early to have a financial plan in place. If you don’t already have one, make it. And it doesn’t just end there, one needs to embark on it. Getting to grips with your finances is a good start here. This is how you move to the next steps. Organising the finances has resulted in a long way for many investors in and around the globe.
It is advised to follow Warren Buffett’s strategy focusing all your money in equity. Warren Buffett has avoided bonds and cash all his life and enjoyed higher growth rates by value investing in stocks. Interest rates are expected to stay on the lower side in 2020. This means it makes sense only to invest in stocks versus bonds, cash or any other fixed assets.
Do not time the market
The average retailer can never understand when the market will actually drop to it’s lowest or reach it’s the highest peak. Equity should not be a long term investment. The duration you stay in the market and when to enter the market are two different things.
Do not solely base your investment decision on past performance
The past performance of a fund speaks a lot about the asset manager’s consistent performance and the gains he/she has helped in making for the fund. When investing in funds do not solely look at past performance. It is also important to check the fund managers objectives, asset management company’s track record and taxation.
Do not treat insurance as an investment
Insurance and investments both serve different purposes. Insurance is for protection from unforeseen expenses like medical emergencies, illnesses death, emergencies on travelling. Investment is for building wealth or corpus. They are interchangeable terms because their goals or objectives are different
Always have a contingency
Having a back-up doesn’t mean that you’re thinking your plan is going to fail, it simply means that you’re ready to handle the situation with a Plan B, if Plan A doesn’t work out. Things like moving your money to stocks, cutting off expenses on vacations etc. could form part of the back-up investment plan.
“The stock market is a no-called-strike game. You don’t have to swing at everything – you can wait for your pitch.” – Warren Buffet
Finally, always keep your expectations realistic. Wise Investing often takes months and years for your gains to materialise. If you expect to earn in just a week, then you are bound to be disappointed. In order to succeed in investing in the stock market, you have to use a system and a strategy.