For investing money, you need not be the lion of Wall Street; you can create wealth even if you’re a novice and have little knowledge about investment.
With half of 2020 gone in the rollercoaster ride, it’s essential than ever to start focusing on long-term investments. These long-term commitments help accumulate wealth for financial goals, such as retirement, or children’s education, etc.
Long term investments are more about accepting a certain amount of risk for higher gains. For example, you can buy a stock of a company and sell it after ten years, making it a long term investment. And, if you sell it within six months – it becomes a short term investment.
The risk with long-run investment is that the value can fall at any given time, but as you’re holding them for a long time, they have a chance to recover. That leaves the ball in your court. An investment may be down for five years, but it could bounce back to double or triple in the next ten years. The longer holding period helps you overcome the ups and downs of the market.
Long term investing is more about striking the right balance between return and risk. However, you will not earn a desirable profit when you put the money into a long-term investment that you sell in a short duration.
Here are the best long term investments to consider in 2020.
- Growth Stocks
Stocks are the Ferraris of Wall Street because they promise high growth with a high rate of return. When you buy shares of a company, you represent ownership in the company. Usually, stock rises spectacularly in value over time, and many companies pay dividends, ensuring a steady income.
When dealing in stocks, you will come across two different types of stocks – growth stocks and high dividend stocks
Unlike high dividend stocks that pay out dividends, growth stocks plow all the profit back into the company, thereby rarely paying a dividend to the stockholder. However, growth stocks are risky, especially when the market is heading for recession as it can quickly lose value. The sudden popularity diminishes in a fraction of second. Due to the high risk, you need to hold the investment for at least 3-5 years.
Risk tolerance: High
Reason to invest:
- Investment in stable companies results in higher gains.
- It helps in diversifying the portfolio.
- It gives a high return for a long-term investment.
- While growth stocks are a lucrative investment option, they are surrounded by a level of uncertainty and can crash in an extremely volatile market.
- When investing in growth stocks, you need to have a high-risk tolerance.
- Exchange-traded funds (ETF)
ETF is a basket of products and assets like equity, commodity, or bonds that track an underlying index. Canadian S&P/TSX index fund is an example of an exchange-traded fund.
Like stocks, it is marketable security, which is traded on the stock exchange. You can purchase it in the morning and sell it off before the market closure. ETFs are an attractive investment option due to low cost, tax efficiency, liquidity, and sector investing. Interestingly, as they are primarily managed by the industry experts and best in class fund managers, the risk exposure is low compared to stocks. When you invest in these funds, you know what you’re buying as these funds replicate the performance of an underlying asset.
Risk tolerance: Low
Reason to invest:
- Reduces long term investment risk
- Economic conditions which affect the smaller assets has no impact on the entire fund
- Like stocks, ETFs are prone to market risks.
- You have to pay commission fees to the online brokers to facilitate the sale.
- It could be challenging to sell ETFs as they’re not traded as frequently as stocks.
- Real estate investment trusts and crowdfunding
Another lucrative long term investment option is REIT and real estate crowdfunding.
They are companies that own and manage real estate assets such as hospitals, warehouses, apartments, office space, retail, etc. You invest in them the same way as you invest in stocks. You buy into the trust, which uses the money to build the property for profit. Like the stock market, you receive dividends for the investment. They are an attractive way to build wealth in the long run.
Real estate crowdfunding is a process of raising working capital by reaching out to a pool of investors through online crowdfunding platforms. As an investor, you invest funds through equity or debt in return for a proportional stake in the profit. One noteworthy feature of the investment is that it gives small investors like you, the opportunity to invest in high-income real estate projects.
Unlike the REIT, crowdfunding gives you the option to select the real estate investment.
Real estate crowdfunding is bringing a paradigm shift in long-term investments because the advantages outweigh the risks. It creates a winning situation for everyone because developer raises money without banks and traditional lenders, and investors make a lucrative return
Risk tolerance: Medium-high
Reason to invest:
- Real estate assets are not monitored or coordinated like the stock market resulting in higher returns.
- Many REITs are for a long time, which can generate a steady flow of income.
- No investment cap and you can start with $100.
- These are illiquid investments, and you cannot sell for cash unless the real estate project completes.
- REITs are prone to market volatility.
- Higher interest rates tend to downgrade the share prices of the REITs.
- Mutual funds
In the investment world, mutual funds are safe funds as you benefit from a stable income at low risk. These are a perfect investment vehicle for those who lack the expertise to invest in stocks. A mutual fund scheme collects money from investors like you and invests the money in different stocks collectively. It offers a diversified investment portfolio and provides a low-cost way to invest money.
Mutual fund shares are traded continuously, but the prices are adjusted at the end of the day.
When you’re planning to invest long-term, stock funds and bonds funds are the best mutual funds to consider.
These funds deal with companies trading on the stock market exchanges. It’s an excellent option for those who want aggressive results without spending too much time calculating the risk of different investment options. When you buy a stock fund, you get the weighted average return of all the companies in that fund. Furthermore, stock funds are less risky because if one company in the fund files for bankruptcy, you will not lose all your investment.
The bond funds primarily invest in securities offering a fixed income to the investor.
A bond is a safe investment, and it becomes safer as a part of a fund. A fund comprises of hundreds of bonds from different companies, which helps in diversification and reduces the risk of a bond default.
Risk tolerance: Low – medium
Reason to invest:
- A bond fund is relatively stable and is affected by the prevailing rate of interest.
- Government bonds are the safest investment options.
- Diversifies the portfolio.
- While diversification helps in reducing the risk, it also dilutes the gains. Buying too many mutual funds for diversifying the portfolio reduces the profit.
- Robo-adviser portfolio
If you’re a novice and want to leave all your investment decision to a professional – a Robo-adviser is an ideal choice. The Robo-advisor uses intelligent software to offer the services of an investment manager.
With a Robo-adviser, you deposit money in a Robo-account, and the adviser invests the money in different securities based on your goals, risk tolerance, and holding period. Through a questionnaire, the software determines your appetite for risk and spread your investment in ETFs and other low-cost funds.
Based on your investment goals, you can set the portfolio to be conservative or aggressive. It will help you build a low risk diversified investment portfolio that will help meet the long-term investment goals.
Risk tolerance: Low
Reason to invest:
- Builds a diversified portfolio and provides stable annual returns.
- Low commission cost.
- As a computer program manages all the investments, they’re not 100% personalized. In fulfilling the long-term goals, it can overlook the short-term goals.
*This is a Sponsored Feature
What is the procedure for proving a missing or lost Will?
By Alexa Payet, Partner at Bolt Burdon and listed specialist in the Certainty
Contentious Probate Hub & Area
When an individual dies it is necessary to search their paperwork to establish whether they made a Will and gather information regarding their estate. This is important because the personal representatives of the estate have a legal duty to distribute the estate correctly and could be held financially responsible for any mistakes made through any breach of duty.
Where a Will cannot be found but is believed to exist there are a number of steps that can be taken to help confirm its existence, including (but not limited to) the following:
- making enquiries of the deceased’s family and friends;
- making enquiries with the deceased’s professional advisors;
- instructing The National Will Register to undertake a Certainty Will Search.
Presumption of revocation
Where the original Will is known to have been in the testator’s possession before their death and cannot be located afterwards, there is a rebuttable presumption that the Will was destroyed by the testator with the intention of revoking it. If an order for the proof of a copy is to be obtained then this presumption must be rebutted.
Procedure for proving a copy Will
The procedure for proving a copy Will is set out in Rule 54 of the Non-Contentious Probate Rules 1987 (‘NCPR’).
The application is made to the Probate Registry at which the application for the grant will be made and the order can be made by a district judge or registrar.
The application must be supported by evidence in the form of an affidavit (although during the global pandemic the rules have been amended by the Non-Contentious Probate (Amendment) Rules 2020, SI 2020/1059, to provide for the use of witness statements as an alternative to affidavits).
The evidence must set out the grounds of the application and any available evidence that the applicant can adduce as to the Will’s existence after the death of the testator or, where there is no such evidence, the facts on which the applicant relies to rebut the presumption that the Will was destroyed by the testator during his/her life.
The applicant must ensure that the Court has the best available evidence of what happened to the testator’s Will in order that effect may be given to his/her testamentary wishes.
It is important to understand that the applicant does not need to demonstrate that the Will has been lost (it is the fact of its loss which gives rise to the presumption of revocation). Instead, the applicant must establish, by evidence, that the Will was not in fact revoked.
What is a Certainty Will Search and why is it necessary?
A Certainty Will Search searches for Wills that have been registered on The National Will Register (circa 8.7 million Will registrations in the system) and for Wills that have not yet been registered in geographically targeted areas where the deceased used to live and/or work. A Certainty Will Search is extremely important as it will be necessary to notify the probate registry of any persons who would be prejudiced by the grant if the copy Will is proved. If no such person exists then the registrar is more likely to grant the application. Alternatively, if such a person does exist then you should seek to obtain their written consent to the application. The written consents can then be lodged with (or following) your application.
Oil prices rise as investors look to higher demand seen in second half
By Shadia Nasralla
LONDON (Reuters) – Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally are cooling fuel consumption.
Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.
“The perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away,” said PVM analysts in a note.
U.S. West Texas Intermediate crude was at $52.65 a barrel, up 29 cents. There was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.
Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020.
China also avoided an economic contraction last year.
Investors are watching out for U.S. oil inventory data from the industry association API, due on Wednesday, the same day U.S. President-elect Biden’s inauguration speech will likely give details on the country’s $1.9 trillion aid package.
The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.
“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.
(Additional reporting by Florence Tan, editing by Louise Heavens)
Can Thematic Investing provide investors with growth opportunities in uncertain times?
New whitepaper from CAMRADATA explores
CAMRADATA’s latest whitepaper on Thematic Investing, considers the role this type of investing can play in asset management and explores trends that can permeate society and traverse sectors. The whitepaper includes insights from guests who attended a virtual roundtable on Thematic Investing hosted by CAMRADATA in November, including representatives from CPR Asset Management, Sarasin & Partners, Impact Investing Institute, PwC, Quilter Cheviot, Scottish Widows and Stonehage Fleming.
Sean Thompson, Managing Director, CAMRADATA said, “In these seminal times, thematic investing has the potential to shape how the future unfolds. Yet running a successful thematic fund is no easy feat – it is a bit like navigating unchartered waters trying to identify the trends and the long-term opportunities.
“Trends such as AI and biotechnology are still in their relative early days, for example, and global economies are undergoing dramatic changes. But mapping out certain trends, identifying potential sustainable returns through a unifying thread that spans multiple sectors, could help future-proof investments. “Our roundtable guests considered current key themes, which themes worked well, and which have not and how thematic investors could identify trends with the potential to offer future growth.”
The guests named themes they currently like which included artificial intelligence, China, climate change, clean energy, automation, evolving consumption, ageing, digitalisation, water, waste management, biodiversity, and board diversity.
After discussing themes that have worked or not, the guests looked at total allocation to themed funds, and whether clients might be blinded by themes to the overall risk exposure in their portfolios.
Key takeaway points were:
- Themes have a habit of coming and going. One guest recognised that automation and robotics, for example, were cyclical, which means that investors will have to think carefully about entry-points.
- It was agreed that the commodities ‘super cycle’ of the 2000s came about with the economic development of China. Many commodities-based products found their way into mainstream investing, but this is unlikely to happen again.
- One guest was surprised by some of the themes that interested their customers; with their research showing that Board Diversity was almost the lowest-ranking concern among the ESG choices they listed.
- There was correlation between environmental impact and social benefits to investing. The theme that concerns the Impact Investing Institute, which is less than two years old, is improved measurement of such relationships.
- In terms of successful themes, one clear winner due to COVID had been digitalisation.
- One theme that has not done so well is the Ageing theme focused on older people travelling and enjoying experiences abroad later in life.
- One guest said their firm used themes for ideas generation, not as a shortcut for portfolio construction. They said themes lead to good ideas, but they then spend at least three months researching a stock, so that the best themes are represented by the best investments.
- The final point was that there are sensitivities for any global investor in allocating to themes, even the biggest one of all, Climate Change.
- But on a positive note, one guest added if all stakeholders can resolve their differences on definitions such as impact and ethical investing, then more capital will be readily transferred into opportunities.
The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:
- CPR Asset Management: ‘Central Banks: leading the path towards Impact Investing’
- Sarasin & Partners: ‘Theme or fad? How to invest for the long term’
To download the Thematic Investing whitepaper, click here
For more information on CAMRADATA visit www.camradata.com
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