Believe it or not, we are in the final quarter of the year. Where has 2019 gone? While I leave you to ponder the answer to that question, it is definitely time to look at your stock portfolio and prepare it for next year.
Some events we already have in the calendar, for example the US election in November 2020. Others we are less sure on, take Brexit for example. In 2020 we may have left the European Union with a deal, no deal, or we might not have left!
Overall, positioning and re-balancing your portfolio is a wise move at any point in time, but at least once a year. Below are my three top tips for next year.
Sitting down and doing your own research is invaluable when finding ‘quality’ stocks to invest in. Take a look at the company balance sheet, the profit and loss account and the income statement. Review analysts’ forecasts for the stock, and their reasons why they make the call. With a focus on next year, look at company earnings and where they come from.
In my opinion, buy domestic businesses for 2020 as they will likely perform well if a Brexit deal is struck. We have already seen signs of this last week from Lloyds Banking Group’s share price spike.
Buy high-yield dividend stocks
Heading into 2020, most investors will be looking to generate some form of income aside from the performance of the underlying stock. I feel this will be very important for next year, as interest rates are likely to stay low here in the UK (currently at 0.75%).
Therefore, Cash ISAs are unlikely to generate you the same kind of return you could get from high-dividend-paying names such as St James’s Place. Its dividend yield for next year sits at 5.8%. Take the time now to look for these kinds of names to add into your portfolio now, so that you can hopefully obtain a good level of dividend income for next year.
Don’t worry about volatility
In the second half of this year, we have experienced high levels of volatility in the FTSE 100. Intraday moves of over 1% are now common. I expect this trend to continue into 2020, largely due to event risks such as the aforementioned US election and also the US/China trade war.
While you may say they are international events, even domestic issues will provide volatility. Brexit, a potential General Election, Bank of England meetings etc. These could shoot the market higher, or indeed lower.
Amid all of this, no one can guarantee that the market will trade sideways. There will likely be days when the FTSE 100 is down, with high volatility. Don’t worry! Your portfolio should be something to hold for the long term, past 2020. If you follow my tips of buying quality and also having high-dividend yield-stocks, over the longer term, you should generate a positive return.
Jonathan Smith owns Lloyds Banking Group shares. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.