2020 is about to come and go, and while it may have been an exceptionally tough year for most, it didn’t come without its merits — especially for investors looking to diversify their portfolios or dabble in something new. 2020 saw a year of tumultuous ups and downs, with markets reacting to political instabilities or seeing the light at the end of the tunnel with the development of potential Covid-19 vaccines.
So, what does this all mean for the year ahead? After a chaotic year, there is hope for a happier, healthier and more normal new year. Here are some trends to look out for in 2021.
Industries looking to make up for lost time
With many industries and sectors looking for a stronger rebound in the aftermath of 2020, there are some who are poised to make bigger waves. According to Morgan Stanley, the travel sector, which has undoubtedly been hit hard due to Covid-19, are likely to be in favour of making a strong return. Others, like the oil industry — a more straightforward choice — is clamouring for space against other commodities, such as metals.
Many investors saw the opportunity to snap up stocks and investments in industries that were hard-hit as a result of country-specific lockdowns (or Circuit Breaker for Singapore) due to Covid-19. This means dabbling in not-so-obvious stocks, including those of F&B groups and retailers, in addition to those in the aviation industry.
However, with such investment decisions, don’t expect everything to rise meteorically overnight. These calculated decisions leverage on the softening market in specific industries, which will hopefully result in a positive outcome for 2021. Adding the ever-growing importance of healthcare companies and conglomerates into the mix, it’s possible to imagine a mini-boom or resurgence in 2021 — whether it be early in the year or later on.
Diversifying to more than stocks
While stocks may be one of the easiest classes of assets to grasp for those looking at investing, there are plenty of other assets to consider in 2021. One of the big spotlights is shining on ETFs, or exchange-traded funds, which is a basket of securities that tracks an underlying index. ETFs often contain various investments including stocks, commodities and bonds, and can invest in a number of industry sectors or use various strategies. ETF shares are also listed on exchanges and are traded throughout the day, much like stocks.
No two sources will list the same types of ETFs to invest in for 2021. Diversification of different international stocks provides a straightforward way to geographically diversify an investment portfolio. As different countries have different methods of tackling the global pandemic, there are some markets that will bounce back faster than others. It is important to keep tabs on global news to suss out what is happening around the world. Additionally, there are a handful of ETFs that provide unique global exposure, if you’re willing to do the research.
Keeping abreast of global trends
Lastly, it is ever important to be on the pulse and keep abreast of global issues. Many researchers and strategists have outlined key themes that are set to make waves in 2021. According to CNBC, this includes a “green wave”, which encompasses clean energy and electric vehicles; a recovery from the Covid-19 pandemic; and for US market watchers, President-elect Joe Biden’s new agenda.
If 2020 has taught us anything about investing, it is that investors should have well-established principles that are supported by low-cost diversified portfolios and investing for the long-term. While it may be tempting to make a quick buck with the latest, greatest and hottest stocks or sectors, this often means that once the wave is gone, so is the opportunity.
January 2021 will be dominated by Biden’s incoming administration. There are plenty of factors that hint at a slight uptick in US market performance based on Biden’s plans and its potential impact on stocks.
While healthcare stocks have seen a boom in the past few months, as speculation rises on the efficacy of vaccines developed by the likes of Pfizer and Moderna, smart investors will also look beyond the healthcare industry to diversify their portfolios. The distribution of vaccines will have a major impact on less obvious industries, such as that of the logistics and technology sectors, which will undoubtedly be called on to transport and keep vaccines at their optimum.
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