The year sets off with lots of indecisiveness for most investors. With UK's ongoing Brexit negotiations and US change of presidency, uncertainty hovers on both local and global markets. The Gold market, for example, rallied the previous year sharply until the start of Brexit negotiations. Similarly, the price of crude oil doubled after a pretty difficult period. As such, investors are likely to lean towards defensive stocks to avoid risk. Next is a look at how best to invest money in 2017.
Despite the volatility of the stock market, it remains a favourable venture in 2017. Given the trend presented by bonds to stock ratio, investors should consider putting their monies in the stock market with a keen interest in the biotechnology sector. The industry did pretty well in the previous year, and its performance has been on the rise for the last five years. Financial experts predict huge profits in biotech stocks if the market becomes bullish in 2017. However, investors who are sceptical about buying biotech stocks should consider venturing in financial alternatives. With higher interest rates, the financial market is likely to breakout from the secular downtrend this year.
During the great recession, the commodities market of silver, gold and copper was all the rage. Stock markets lost over fifty percent of its value as the price of gold increased from £600 per ounce (2007) to £ 1900 in 2011. Albeit a depressed base in 2016, gold stocks were the best performing subgroup. The investment generates enormous profits for an investor's portfolio, but financial experts warn against relying solely on commodities market to make up an entire portfolio as they are risky. However, since they tend to perform in the opposite direction to the stock market, they provide a perfect hedge against its volatility.
Individuals who are on the verge of retirement should reduce investment in stock and allocate more funds to bonds that you can trade on online platforms such as CMC markets. While you won't realise high returns as in the stock market, you mitigate the risk that comes with the volatility of the stock market. Bonds barely lose fifty percent or more of their value since they only present risks if they are not diversified. EFTs and mutual bonds provide non-stock exposure with the bonus of diversification.
Buy-to-let investments have become rather lucrative over the past few years amid the stamp duty and the tax imposed last year. The investment is rather different from owning a home as investors earn profits by:
• Collecting rent
• Capital growth where profit is made after selling a property for more than its buying price
To buy a residential home, an investor takes out a buy-to-let mortgage with a cash deposit. Note that the mortgage comes with risks; thus an investor who sells the property at a loss may get a price that covers the mortgage payments. Additionally, the amount of rent charged varies, depending on factors like the wider market trends. Therefore, a buy-to-let investment is ideal for persons who:
• Prefer tangible investments to stocks and shares
• Don't mind tying up funds for long periods of time
• Understand that property prices are volatile
• Are risk-takers who are willing to take on the investment even when it doesn't yield profits
• Are well-informed about the additional risks of mortgage-based properties
Investors who prefer a less risky real estate option should consider investing in indirect property investment alternatives such as real estate investment trusts, land banking schemes and property funds. They can as well invest in unit trusts or buy shares in listed property companies.
Certificates of Deposits
A certificate of deposit is a simple low-return investment where the investor hands over cash to a bank or credit union for a particular period in exchange for interest and the principal. Though CD's generate low returns, they are stable throughout the period. However, with inflation rates rising in almost every market, the principal balance tends to reduce drastically.