Where to invest in 2021
So, the new year has come, which means it’s time to make forecasts, including financial ones. For those who remain a fan of the banking product as the main option for storing savings, there are still not very favorable conditions.
Last year, in addition to all the misadventures and shocks, can also be noted as the year of one of the lowest interest rates on deposits. Experts are already talking about the lowest interest rates in post-Soviet Russia.
In the good months, the banks’ best deposit offers were barely 6%. And by the end of the year it was possible to open a deposit more often at 3%, and this is almost not the ceiling. In a word, keeping money in a bank in order to earn money is not the best idea, because the potential income does not even cover inflation.
So where is it better to invest in 2021, and what kind of return do these or those instruments promise? Let’s talk about this in more detail.
General investment advice in 2021
There is no so-called “magic pill” or one-size-fits-all investment recommendation. The choice of assets depends on your willingness to take risks, your expectations in terms of profitability, for how long you plan to invest in this or that instrument.
The investment horizon is also, of course, important, since different instruments work with varying efficiency over different periods.
Until the situation with the pandemic has a solution, it is too early to talk about the stabilization of markets. At least the first quarter of 2021 is not a very favorable time for acquiring assets with a high level of risk, this advice is especially relevant for novice investors.
Already in the second quarter, it is expected that monetary policy will change, the Central Banks will make a number of decisions, which, in turn, can make some assets more attractive for buying.
In any case, if you become an investor from scratch without experience in such work, it is worth considering assets as the risks grow – from the most conservative to the most risky.
Banking products – deposits and deposits
And since we started our conversation with deposits, we will continue it. The cycle of decreasing lending rates has ended, while on deposits one can even expect some (albeit insignificant) rate hikes during the current year.
The only plus of this type of investment is their relative reliability. Naturally,
a bank deposit is far more secure than an investment in the stock market, so those who advocate safety continue to stubbornly keep their money in the bank.
In addition, bank deposits are insured, and this is another guarantee of their safety. So if the money is in a reliable bank, then problems should not arise.
There are much more cons here:
- extremely low product profitability;
- lack of prospects for growth;
- disloyal conditions of banks, which, as it turned out, can easily make the offer even more disadvantageous;
- a new law providing for taxation of deposits.
The latest innovation of 2020 made a bank deposit an unattractive investment option. Fortunately, there are other options as well.
Ruble bonds are the next most risky instrument behind the deposit, and for former depositors, this is a reasonable investment option. Even a very conservative level of OFZ yields will still be higher than the income on deposits.
At the moment, the yield on bonds of the first tier companies is about 6%. If we talk about the second echelon, then here the income is 7-7.5%. As you can see for yourself, this is already higher than the return on deposits.
It is not worth expecting that bond yields can change sharply in 2021, so medium-term corporate bonds, with the inclusion of long government bonds and more risky instruments in the form of stocks, will be a suitable option for investments. If the yield on bonds seems insufficient to you, you can add Russian stocks, thereby balancing your portfolio.
The Russian stock market is still one of the cheapest in the world in terms of multiples, but in recent years a high dividend yield has been added to this cheapness. Russian companies are generous enough in dividends, and given the existence of such an option as individual investment account, the profitability can grow even more.
In 2020, the Russian stock market experienced a bearish phase for the first time in many years and managed to grow back. However, as statistics show, this period is replaced by growth for at least two years. This means that in the near future the shares will grow, which means that you can include them in your portfolio in the hope of an increase in value.
If we talk about shares of foreign companies, then there are promising areas for investments.
- A number of US companies may also raise their dividends.
- President-elect Joe Biden’s policies make the green tech sector attractive for investment.
- The growth of the S & amp; P 500 index could also be pleasant if the scenario is positive.
In general, 2021 looks quite positive for developing countries and for Russia in particular. In terms of sectors, it is worth paying attention to commodity companies and the financial sector. In any case, do not forget that choosing assets for a portfolio is important not so much in terms of potential profitability and growth, but in terms of tolerance to the risk that the investor is willing to accept.
Gold and Currency
In fact, for any reasonable investor, some of the capital is translated into foreign currency. This is natural, logical from the point of view of diversification, and can provide some income under a favorable set of circumstances.
However, hoping that you can make money on the course races like you did last year is not worth it. Yes, the dollar exchange rate is changing, but there is no need to say that it will take off unexpectedly. We can expect both an increase and a decrease, and both processes will be short-term.
So buying dollars and euros for the entire available amount is at least unsafe … It is much better to regularly buy currency in a certain volume and at approximately regular intervals in order to balance the difference in value. It is definitely not worth betting on a sharp and stable growth of currencies.
As for gold, it can also be held in a portfolio as a defensive asset. You can buy gold from the bank or give preference to funds on the exchange. In the short term, such investments do not promise huge profits, but for the long term, a protective asset will be useful.
The investment topic is incredibly exciting! And if you want to become an investor, but do not know where to start your training, I recommend you the training events of the Academy of a Private Investor. Register your Personal Account and find out the details right now!