We are still wondering how come this year has gone by so fast, considering we’ve been in a lockdown most of the time. 2021 is just around the corner. While we hope 2021 might mean the end of the pandemic, we can focus on other things, while we did this year. If you are into trading or want to dive into the field, some investment tips can be useful for the upcoming year. It’s better to be prepared than surprised. There are good stock market predictions for the forthcoming year, but since the recession is inevitable, we cannot disclude the possibility of a market crash or something similar. Here are some tips to stay in the trading game, without fear of losing too much.
Make it simple
If you think you are spending too much time observing the market and its movements, you can make it a bit lighter. Of course, being informed is a must, but sitting at home and watching changes in activity all the time can become overwhelming. This is why we want to mention index funds. Mutual funds or index funds are still very popular. What are index funds for? Thanks to them, you can buy a variety of stocks, and the primary goal of index funds is to match the market indexes’ performance they are connected with. It means by buying index funds you invest in the broad market, but what’s important is you haven’t lost days working on it.
A diverse portfolio
Having a diverse portfolio is essential since it can act as protection if the market becomes too volatile. What is your goal here? To load up on stocks that come from a range of market parts. If this also becomes overwhelming for you, you can stay within the index fund safe zone, since you will still see the benefits. Though more conservative, bonds could be a useful addition to your portfolio, as could real estate, whether in the form of physical properties or REITs.
Make your portfolio with your age.
If you are close to retirement, an overly aggressive portfolio can be a bit too much. The same goes for if you are too young – if you have a portfolio that focuses primarily on bonds, it can give an impression you are too conservative if you are in your 20s because you can take more risk. When 2021 begins, you should check your assets, see where they are allocated and see if your trading strategy needs to be updated.
Always have cash
Above, we mentioned pandemic could influence the market in 2021 in a volatile way. That is why we recommend having cash within a reasonable amount, so you can avoid liquidating your investments if you need money. In case stock value goes down, you will have an excellent opportunity to buy some, but only if you have cash ready. We don’t think every bad scenario will come true. We all know the market is volatile in general, and it creates good and bad opportunities. Here, we are focusing on what to be ready in case something goes wrong. If you are prepared, then you won’t act impulsively and invest badly or too much, so you lose in the end.
Long term thinking
It would be best if you talked about this with your broker, but it’s a fact you will need to make a couple of investment decisions that need to be very specific. It should be objective thinking rather than what you think is best. It is what long-term strategy is for. Think in years, not months. Trading is investing so aim to make money by buying investments you can hold for years if needed.
We wrote this article to give you the best advice that will get you prepared for anything, regardless of 2021 and not knowing what will happen. Thinking long-term is the best way to go. Even if you are impatient, you will learn how much benefit you can have from staying put and investing while thinking about more extended financial solutions.
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