If you’re looking for the best investments to make in 2020, your timing could be good.
For example, last week’s figures from the Office for National Statistics showed a dire plunge in GDP for the second quarter of the year. But there were encouraging signs of recovery in May and June as lockdowns began to ease.
A good time to invest
In the real world, when economies begin to emerge from recession it can be a great time to start or expand a business. And in the stock market, new bull runs begin at the bottom of bear moves. Indeed, many shares have recovered from their spring lows already. And that makes sense because the stock market tends to be a leading indicator. Meanwhile, the ONS figures are a lagging confirmation that the stock market was ‘right’ when it rose earlier.
That doesn’t mean there isn’t anything to worry about – there’s always something to worry about. And that’s why people often say that “the stock market climbs a wall of worry”. But if you adopt a long-term investment horizon, fears about a resurgence in Covid-19, for example, will reduce to short-term concerns. Over an investing period of, say, 30 years, you’ll hardly notice any setback that arises on the charts. Over the long haul, the stock market tends to go up and so do investors’ returns.
Time in the market
That’s why another expression is popular: “It’s not timing the market that counts, it’s time in the market.” And one of the easiest and most effective ways of making sure you are in the stock market is to buy and hold tracker funds. These low-cost instruments have several advantages. For example, they give you wide diversification across many underlying shares. And they remove the risk of faulty stock-picking either by yourself or by a fund manager.
On top of that, tracker funds allow you to target specific areas of the market. But I’d go for a general approach such as picking trackers that follow the fortunes of the FTSE 100, the FTSE 250 and America’s S&P 500. I reckon those investments could form a decent bedrock of any long-term portfolio.
After that, I’d consider some of the various investment trusts on offer in the pursuit of higher returns. Decent examples include Finsbury Growth & Income Trust, BlackRock Smaller Companies Trust and Alliance Trust. The great thing about investment trusts is they’re run by professional managers. But they’re companies themselves, listed on the stock market.
Finally, for those with investing experience seeking the best investments in 2020, you may choose to go for the shares of individual companies with the aim of further increasing your annualised returns. In my search for investments, I’d emphasise the quality of the underlying enterprise rather than looking for cheap shares. Warren Buffett, for example, searches for “wonderful” businesses selling for a “fair” price.
