I can understand your position if you’ve arrived at your 40s with no meaningful savings. You’ve probably just been through some expensive years. It’s not a cheap process to bring up children and buy a home to live in, for example. But, right now, there are some decent opportunities in the stock market. And I reckon those could be some of the best investments for 2020 and beyond.
Here’s how you can find the best investments for 2020
Of all the assets you could invest in, I reckon shares have the most potential. I’d shun Bitcoin, buy-to-let property and cash savings, for example, because shares have a long-term reputation for out-performing all other major classes of asset. And that being the case, you’ll have a potential tailwind behind you if you start an investment programme in shares and share-backed investments now.
Bearing in mind you won’t qualify for the State Pension until you are closer to 70 than you are to 60, there’s a potential investing period of around 30 years ahead of you at 40. Indeed, many people invest to build up a pot of money capable of supplementing their income from their State Pension in retirement. And 30 years is a decent amount of time to get the ‘magic’ of compounding returns to work for you with shares.
Key to success, I reckon, is to invest regularly. I’d set up a regular monthly payment to feed investments held within a tax-advantaged wrapper, such as a Self-Invested Personal Pension (SIPP), or a Stocks and Shares ISA. Then, I’d aim to fill those accounts with shares and funds that are capable of compounding returns over time.
One of the opportunities in the stock market right now is its general depressed level caused by the coronavirus pandemic. Indeed, when share prices are lower and the underlying businesses are suffering from a temporary setback, we can often get more for our money with shares. That’s because valuations can shrink in troubled times. So, buying them can lead to gains as valuations rise again when the underlying businesses recover.
Both a broad-brush and a focused approach can work well
You can take a broad-brush approach to buying the lower level of the stock market by investing in funds. I’d go for trackers following the FTSE 100, FTSE 250 and America’s S&P 500, for example. If you select the accumulation version of each fund, the dividends will automatically be rolled back into your investment for you. And that will set you on the path to compounding your gains.
The great thing about tracker funds is the costs are low. And you can invest in many of them with sums as small as £25. So, dripping a regular amount of money into your investments would work well. But as well as trackers, I’d look at managed funds, such as those run by Lindsell Train. And I’d also add a few carefully selected shares backed by individual companies.
Right now, the housebuilder shares look depressed, for example. Yet the long-term future seems bright for those firms. I’d consider names such as Persimmon, Taylor Wimpey and Vistry, which could prove to be some of the best investments for 2020 and beyond. But they aren’t the only shares I’d consider. And if you dig into doing your own research, I’m sure you can uncover other decent investing opportunities in shares right now.
Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.