Without claiming to be clairvoyant or psychic, we think we can confidently predict that your 2020 investment plans didn’t work out the way you hoped that they might back in January. If it’s any consolation, nobody else’s did either. We hope you and your adviser were agile enough to adjust to the nightmare that was 2020 as it happened and moved your money to the safest possible places to avoid the worst problems that came with the pandemic. We know that wasn’t possible for everyone, though. Many people will have lost money on what ought to have been good investment ‘bets,’ and others will have made money almost by accident. If you’d had a small holding in a video conferencing company in January 2020, for example, you’ve probably had an excellent year.
Whatever happened in terms of your investments in 2020, the year is over now, and it’s time to start thinking about 2021 instead. Given everything that’s changed in the markets during the past year, this is probably a good opportunity to change your tactics and take a different approach from those that have served you well in the past. 2021 is going to be an unusual year for investors, and that might necessitate an unusual approach if you’re going to take the maximum potential from it.
You can do that by making some promises to yourself – New Year’s resolutions, if you like – about how you’re going to manage your investments during 2021. We’ve listed a few suggestions for you below to help get you started. Don’t act solely on our suggestions, though – we’re not advisers, and it’s important that you employ the services of a qualified professional before making any significant changes to your investments and holdings.
Diversify Your Holdings
Diversification might mean making less money out of any single investment, but it also limits the risk of having too much money on one pot if that pot suddenly shatters. Diversification is your safeguard against market volatility, and if we were to make only one prediction about the markets in 2021, it’s that they’re going to be volatile. Even without the lingering effects of the pandemic, 2021 is the year of Brexit and Great Britain forming new trading relationships with countries all over the world. As one of the world’s five largest economies, that’s going to cause a few shockwaves. Spread your money across different asset classes and different industries. It might take a little bit longer to make significant profits this way, but slow gains are preferable to sudden losses.
Cut Back On Fees
Your adviser will almost certainly charge you a fee for their services. So long as the fee isn’t astronomical, you shouldn’t resent paying it. In return for that money, you’re getting professional advice, opportunities you might not get elsewhere, and accountability if things go wrong. Some of the funds they advise you to invest in might also come with fees attached, though. Actively managed portfolios and funds are the worst for this. Your adviser fee might not amount to much on its own, but when you add that to individual fund fees, you might find that a significant percentage of your profits are disappearing into other people’s pockets. Ensure you’re getting the best possible deal from your adviser, and try to cut back on fees elsewhere.
Take More Gambles
If you want to make big money during the next year, you might have to gamble for it. That might mean taking a punt on funds you wouldn’t normally consider. While gambling is counter-intuitive to most people, consider this. If you couldn’t make money from gambling, people wouldn’t do it. Those who do it successfully know the difference between a good gamble and a bad gamble. Consider the games available to you at online slots websites. The best odds of success don’t come from the online slots themselves. They’re too wild and unpredictable, and you can’t do anything to influence their performance. They’re too random to be relied upon as a money-making scheme. While people do earn money from them, slots are there as much for entertainment as they are for anything else. A skilled poker player, by contrast, is more likely to win money than an unskilled one. Become an investment poker player. With the help of your adviser, identify one or two ‘high risk, high reward’ stocks, and consider putting money into them. Just be sure not to spend more than you can afford to lose.
Fund Your Retirement
Not all of the money you invest should be intended to yield results this year, next year, or the year after. In all the excitement of having money to spend and invest, many of us all-too-easily focus on the here and now and forget to think about our retirement. That’s why a terrifyingly high number of people don’t have sufficient funds put aside for their 401(k) funds. We know it isn’t as exciting to put money away specifically for retirement as it is to spend on something that might double or treble in value in the next ten years, but time passes faster than any of us realize. There will come a day when you no longer want to spend your days playing the markets, and you’ll be happy to have a regular, guaranteed income from your pension fund. Don’t forget to put money into it so you can take it back out again when the time comes. In fact, consider making it a priority.
Failing to rebalance regularly is one of the biggest mistakes any investor or trader can make. The market changes every day. If you only rebalance your portfolio once a year, you could easily find that you have far too much money in the wrong places by the time you come to take a look at it and not enough in funds that could have performed better if you’d paid into them. At the very least, you should be booking time with your adviser to rebalance every six months. Some people even do it every quarter. Changes happen in real time, and so the quicker you respond to them, the more profitable your investments will be. Sticking money in a fund and then coming back to see how it’s got on a year later is as ineffective as planting a flower and hoping it will grow without being watered.
There will be trying times ahead for investors and traders in 2021, but we don’t anticipate anything that can’t be managed with sensible steps taken where possible, and smart fund management. Speak to your adviser, make yourself some promises, and set out with the intention of making more money in 2021 than you did in 2020. It’s possible!