It’s a known fact that 2020 was a volatile year for the financial markets and the economy. And some experts think that 2021 might also be the same. Hence, you might not feel like making any fundamental investment changes this year. But this might be a good time for making essential adjustments to your existing portfolio. Things might also look like you are taking on some challenges instead of investment options in a conventional sense.
According to Paul Haarman, the three best investments that you can make in 2021 include:
Create the cash reserves
Stocks will still work in 2021! However, you shouldn’t expect that the market will have the same performance as last year. S&P 500 index was indeed above 14% by Christmas time. That brings a gain of 29% in 2019. However, both the numbers are much above the average annual return of approximately 10% annually.
It doesn’t indicate that the market in 2021 will take a dive. However, it might be time for an expectation adjustment. And since there isn’t any way for counterbalancing losses in the stocks and assets, the default option is cash.
It maintains its value when there is turmoil in the financial markets. It also offers the capital for purchasing stocks at a bargain cost. You might prefer to do this after a general market downturn or leverage investing in certain market sectors.
Stocks are still the best option 2021
It is challenging to predict the way forward for the stock market in 2021. However, stock investment is mostly about playing averages. And this usually favors retaining a huge position in the stocks.
Paul Haarman says that you might want to get more selective here. The primary indices, such as the S&P 500 and the NASDAQ 100, have powered the tech stock strength to a great extent. And just in case that domain starts to move south, it might drag down major indices with it.
And if you have already invested heavily in S&P 500, a huge cash position will provide you with the scope to invest in the upcoming sectors if there is a decline in the general market. Meanwhile, you may also consider investing in small cap companies. Vanguard Small Cap Index Fund is one of the best small cap index funds out there that you may consider.
Investing in a side business
A side business gets counted as an investment option. Here, effort and time might be the main areas of investment, other than money. And realistically speaking, when you invest in a side business, you, in a way, invest in yourself.
Today, most investors prefer side hustles! Their current income portfolio comprises various side businesses that regularly contribute to the bottom line. And today, there are many ways a person can generate ample cash from a side business. For instance, the silver and gold investments can go a long way in making profits for future ventures.
Things don’t have to be as complex as you think. The majority of side businesses usually start as a hobby. At times starts by converting what you consider as a primary job into a secondary income source.
Are you planning to invest in 2021? If yes, you can consider the options mentioned above and make an informed decision.