The year 2019 was exceptional in terms of investments. Basically, almost every asset class has grown substantially. Shares increased, both on the BVB and internationally; government securities, real estate and precious metals also grew.
Under these conditions, how do we approach the year 2020 from an investment point of view?
The year 2020, on the natural tactical movement, could be weaker than 2019. As 2018 was a weak year for all assets and was followed by a very good 2019, so we can have a weaker 2020. This does not mean that we will not be able to find good investment opportunities in 2020.
At this moment there is no massive correction in the financial markets in 2020, but rather a stagnation, but you can never exclude a Black Swan event, which will trigger a large correction.
What we are investing in 2020 ?
- Stocks and ETFs on stock indices
A monthly procurement strategy and a long investment term should bring the best results.
On international stock exchanges, I would lean more towards emerging markets and the UK stock market and less towards the US and other developed markets.
I expect that there will be some corrections in the stock markets, during the year 2020, but I do not expect anything dramatic to happen (similar to 2008).
In the long term, a strategy of constant acquisitions has the highest chances of success. The shares remain, in my opinion, the most profitable option for long-term investments.
- Government securities
Although I had unexpectedly good earnings from the state securities ETFs in 2019, for 2020 and beyond, they do not seem so attractive to me anymore.
The interest rates are simply too low and the associated risks are too high.
From my point of view, US securities ETFs only make sense in the context of an all weather portfolio, in combination with other more offensive assets (stocks).
The only government securities that still attract my attention are the RON and USD of the Romanian state and the ETFs of the emerging countries, which still offer good returns in USD.
- Precious metals
For gold, especially for the other precious metals (silver, platinum), I expect 2020 to be a good year. Precious metals seem to have just entered the bull market after years of stagnation.
- High yield corporate bonds
In the context of substantial stock volatility, high yield bonds can be a good option to stabilize the portfolio and offer a consistent and good yield.
If we talk about Romanian high yield corporate bonds, these yield 8-10% in RON and 5-7% in EUR.
Here we must bear in mind that high yield corporate bonds also have a higher degree of risk compared to corporate bonds issued by very large and stable companies. Usually they do well in times of economic growth, but in times of recession, some of them may have problems.
I personally would invest only after a careful selection of these bonds, especially in the short term and I would not over-expose them.
- Credit repayment
One of the few options to mark safe and tax free 5-6% or more per year.
If you have mortgages, you could consider the option of repaying them in 2020. If you have other loans, with higher interest rates, then the more you could repay.
- Real estate
If we talk about apartments for rent and we talk about the 3-4 big university cities and we also talk about an investment term of at least 10 years, I think 2020 is as good as 2018 or 2019 for an acquisition.
Punctual it is possible to make small corrections on the market (10-15%) in the next few years (or not), but over a period of 10 years I think the real estate market in the largest 3-4 cities in Romania will increase substantially.
I prefer investments in equities and bonds. It requires much less time, knowledge and offers greater profits. However, I admit that real estate offers a fantastic advantage: the opportunity to buy in the margin of safety … that is to find a motivated seller from which to buy a few percent below the market price.
Thus, if you manage to buy 10% below the market price and you still earn 5-6% rent in the next year, after 1 year (at the end of 2020) you would already have an additional 15%. Are you still interested if the market is corrected by 10-15%? But if you have an increase of 15% and the market still increases by 10%?
A 50% correction, as it was in 2009 on the real estate market, would be something SF. It would only appear if something really catastrophic happened.
As I see things, the population in Romania will be crowded where the opportunities will be crowded, ie in the 3-4 major university cities in Romania (Bucharest, Cluj, Timisoara, Iasi), maybe 2-3 secondary.
I think in those cities it would be worth investing in the long term and of all these cities, Bucharest has the highest chances to grow the most. Now I think that Bucharest is a “stressed asset” due to poor marketing.
BTW, that does not mean to buy anything and at any price. Already I see that some real estate developers are stretching prices. Let’s try to take margin of safety by a few percent.
- Your own business
The consumption is high and there is a big deficiency in the market of specialists and quality services. If you are good at what you do, 2020 is good for launching a business or accelerating the growth of your existing business.
Be careful not to over-expose yourself and overindulge. We are at the end of the business cycle, though.
If you are good at your job and you are still not paid at the right level, the year 2020 still gives you the opportunity to migrate to a company that offers you more money and more opportunities. On the market is an early crisis of specialists.
Yes, especially in EUR, but possible also in RON, in deposits that cover the inflation rate. It is possible that in 2020 and after appearing very good opportunities to buy discount (shares, real estate, etc.) and part of the cash portfolio does not spoil.
- Alternative investments
Forex, CFDs, Peer 2 Peer, cryptocurrencies I would keep in the area of ”play money” – I would not base my future prosperity on these instruments. They are either too volatile, or too little in your control and without any other authority to guard your back.
At the actions and obligations of the financial supervisory authorities, you hear
external law, you have investor protection legislation. As well as real estate, where you have the notary and the authorities that guarantee the property.
- Invest in yourself
Especially time and secondly, money. I know it sounds like something nice to say and you hear it all over the conference, the idea of ”come buy a course from us” or something like that.
I tell you that nothing in this world will bring you greater returns than investing in you.
First and foremost, it invests time and energy: reading, videos, introspection, working with a pen in hand, researching on the net or books, etc.
Secondly, invest money in quality educational programs and materials, according to your need. He did not study everything, but on your present need.
Pay specialists to help you !!! You will come out cheaper and better.
Third, invest with common sense.
Also watch out for highly marketed products and main stream. Most promise much more than they offer. Read carefully what that product offers and ask for the opinions of those who have already bought it.
I am now amazed how fast enrichment dreams like “you get rid of bosses if you buy our product and you work 2 hours a day, when you want”, when the world is full of people who have escaped bosses and all have worked. 10-12-14 hours for years to get there. But please, who should ask them?
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I know many people who are avid consumers of international educational materials (positive thinking, spirituality, etc.) when in fact they need a simple psychologist. As people who are consumers of international educational products know about entrepreneurship (but are on the verge of bankruptcy), who in fact need the knowledge of financial management and basic marketing.
Common sense, mental health and basic technical knowledge are the most important. Only after … positive thinking, think big and go big…..
Nobody knows what the year 2020 will look like. I am tempted to say that, statistically, they are likely to be a weaker year than 2019.
On the other hand, given the US presidential elections in November, there is a small chance that something dramatic will happen this year. I don’t think Trump will leave the hatches.
Finally, a Black Swan event is unpredictable by definition, and our best allies are: strategic allocation of investments (diversified portfolio of uncorrelated assets) and constant investments.
These are my personal thoughts and analysis, they are not investment recommendations. Each is responsible for their own financial decisions.
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