Creating real wealth requires you to invest your money intelligently. Whether you are a new investor or a seasoned professional, 2016 offers a range of investment possibilities that can help you to earn significant returns on your investment.
Investors of all ability levels are aggressively seeking investment tips and speculative ideas for 2016. Those who are inherently afraid of taking risks or have almost no tolerance for losing money tend to stick to low risk/low return options like bonds, real estate, and precious metals, while those who desire greater returns and have a slightly higher tolerance for risk tend to play within the securities market or currency arena. In this article we will focus on the recent past and near future performance markers of a variety of investment opportunities to help you make a more informed decision as the year draws to a close.
When it comes to any intelligent investment strategy, you’ll never want to put all of your working capital into one investment idea. Rather, create a balanced portfolio by incorporating a variety of investment options. Everyone should own some stocks; bonds are great to balance out the long-term piece of the portfolio; and real estate has proven to be a reliable long-term investment opportunity. Currency swaps can provide incredible gains with a minimal upfront investment, and precious metals have proven to be a reliable hedge against market volatility. But now let’s take a look at the performance potential of a variety of investment opportunities as 2016 draws increasingly closer:
The stock market – if you conduct casual research on the Internet today, you’ll discover a tremendous amount of articles with “clickbait” titles that infer near future calamity within the securities marketplace. Whilst you certainly have to take everything you read online with an air of scepticism, many veteran investors feel that a market bubble will burst toward the end of 2016. In fact, some US-based investment gurus feel that the post-American Presidential election timeframe will see a devaluation of the stock market by as much as 50%. That, plus a depressed global energy sector and large communications companies that have seen some tough times as of late, will continue to drive significant declines in total stock market valuation.
The verdict: keep an eye on interest rates, as stock prices will look increasingly high if interest rates begin to normalise. Stocks should always exist within your investment portfolio, but you must be prepared for significant valuation swings due to some of the forecasted global volatility concerns that experts anticipate happening in 2016.
Real estate – with the exception of certain time periods throughout the last hundred years, real estate has proven to be a reliable and lucrative investment option for most individuals. Some real estate investors decide to purchase residential or commercial properties and then renovate them to create more saleable real estate holdings, while others purchase real estate and then convert the locations into rental properties. Other investors decide to put their money into REITs, or real estate investment trusts. Shares of REITs can be purchased in a similar manner to purchasing shares in a mutual fund, which enables even small investors to participate in the real estate investment trust with just the click of a button.
Looking forward to 2016 sees a general flattening and slowdown in the real estate market. Especially considering slower residential building starts, higher occupancy rates in commercial properties (meaning less growth potential), and the potential for increased base lending rates across the global banks, real estate will, over the next year or two, become less affordable for the average investor.
The verdict: real estate positions should be a part of any diverse investment portfolio, but it is unlikely that real estate holdings will deliver the returns seen in the last few years. The average investor today should designate a certain percentage of his or her investment capital to real estate investing – with an eye towards building wealth through long-term real estate holdings. 2016 may not be the year to significantly increase participation in the real estate market, but those currently in the market will do well to hold on to the investments they currently have.
Precious Metals – As a benchmark for investors throughout the ages, precious metals have been sought after as a naturally-occurring investment option for centuries. After all, precious metals are of finite supply, which means that they inherently have real value. Think about it this way: a gold coin in the 1920s would have had enough value to purchase a custom tailored men’s suit at the time. That same gold coin today would still be able to pay for a similar men’s suit, which demonstrates that the value of precious metals moves in a predictable manner throughout the years. Twenty pounds in 1920 would have bought a very nice suit, yet it wouldn’t even cover the cost of a silk tie in today’s valuation.
The verdict: So the real question is, do gold or other precious metals represent a smart investment move in 2016? With increased global market instability, the price of gold will likely see an increase in the upcoming year – as gold is often used as a hedge against overall market volatility. Due to the inherently conservative returns that are the hallmark of precious metal investing, smart investors will not want to dedicate a large share of their investment portfolios to precious metals.
Currency Market - Investors who seek an opportunity to quickly and efficiently reap significant gains often turn to the currency marketplace, or Forex, to do so. Forex traders play the valuation of two paired currencies off against each other to net a profit. Historically, this investment avenue has delivered incredible profit margins among those who understand the fundamentals of concentrating. Forex demands more of the trader, as having an informed and educated trading philosophy is absolutely crucial to making money in the currency marketplace.
The verdict: while 2016 cannot be predicted with any degree of certainty, specific market indicators show that volatility will come into play this coming year. Fortunately for currency traders, volatility often results in significant shifts in global currency valuations. For those who understand how to identify and react to these global news events and information releases, a significant amount of money can be made in the Forex marketplace.
Savvy investors will continue to create balanced and diverse portfolios that temper risk and reward. An investment portfolio should contain stocks and bonds, precious metals, real estate holdings, and working capital dedicated to currency trading. This balanced approach will help any investor to react appropriately to whatever 2016 delivers.