WHERE SHOULD I INVEST MY MONEY IN 2020?

If you are planning to invest, there are numerous ways to do it. The sheer range of schemes may be confusing. Which method will bring high returns? With world economies disrupted by the pandemic, it is vital to make your money work most efficiently. Discover six ways to invest in 2020.

1. The Stock Market

Today, stocks can be bought and sold through the internet. There is no need to visit a physical exchange. The fundamentals, however, are the same as decades ago. Companies issue shares to attract investor capital. By purchasing a share, you become a shareholder — i.e., you own a percentage of the corporation.

Stocks are bought by traders and investors. The former capitalize on short-term changes. The latter hold on to their assets much longer — sometimes, for years. What makes trading possible is that share prices rise as corporate performance improves. This means you can buy a stock low and then sell high.

On the other hand, some shares pay a regular dividend. This is a portion of the company’s profits. The more shares you own — the higher the dividends. Therefore, you can enjoy a steady profit if you buy enough stock. However, if the company makes losses, your investment diminishes in value.

2. The Currency Exchange

Over the past decades, Forex has undergone significant changes. In the past, the exchange was open for the chosen few. Today, individuals may trade currencies alongside institutions. Connect to the largest financial market via platforms or apps. To profit from currency rates, you need software, a registered account, and knowledge.

Close to 15 million people take part in online trading, and this figure is only growing. Traders buy and sell currencies based on market dynamics. Different pairs have different volatility. The higher it is — the higher the risk. An important advantage of Forex is that any direction can be profitable. Traders buy instruments when they expect them to gain value, and short-sell if they anticipate a drop.

The first step to access Forex is choosing a brokerage. In South Africa, both local and global companies offer the service. Leading online trading brands serve millions of clients across the world. Their operations are also monitored by credible entities (for instance, CySEC oversees Forextime).

Make sure the provider is officially registered and licensed to do business in the region. Reputable brokerages are reviewed on specialized platforms. Customer feedback is also easy to find.

3. Investing in Commodities

There are two ways to make money on commodities. First, you can buy some physical assets, like gold bullions. Gold is seen as a safe investment. It is less dependent on factors that affect pricing for consumer goods. For instance, in times of economic uncertainty, precious metals offer a safe haven for investors.

Secondly, you may profit from the same resources indirectly. It is not necessary to own gold to capitalize on its rising value. Virtual derivatives known as CFDs allow traders to speculate on prices for the underlying assets. Moreover, these instruments can be bought and sold online using platforms for Forex like MetaTrader 5.

4. Investment Bonds

By buying a bond, you lend money to the entity that issued it (e.g., the government or business). The issuer then pays you interest until the instrument expires. This investment is safer than stocks. At the same time, returns are less impressive.

5. Mutual Funds

When you purchase a single stock, your profit depends on the company which issued it. What every trader should know is that diversification lowers risks. It is recommended you develop a broad portfolio with different assets (e.g., stocks, currencies, derivatives, etc). Alternatively, let a mutual fund do it for you.

Through these schemes, you invest in a basket of stocks. The latter is picked and managed by the mutual fund manager. This person receives a fee which is a share of your investment. It is the biggest drawback, as investors can rarely beat the market.

6. Savings Accounts

This is the safest way to invest money, but also the least profitable. In most cases, returns can hardly cover the inflation rate. Basically, you transfer funds into a savings account and then let the interest accumulate. Still, this instrument is useful for those who need to stockpile a sum for emergencies or further investments.

The Bottom Line

High returns are always accompanied by high risk. The stock market is not for the faint-hearted due to volatility. The most stable instruments, on the other hand, will not allow you to gain much. Saving accounts are the safest, but also the worst in terms of profit. Those who are willing to learn may enter the currency exchange or profit from derivatives. Choose the instruments you understand best.