2020 was a turbulent year for many people’s finances. Jobs were lost, businesses failed, and the stock market went through some pretty wild gyrations as various governments announced their lockdowns. Knowing where to put your money seems like a tall order.
In this post, we’re going to give you a flavor of the smartest investments to make this year. So let’s take a look.
Invest In A Side Business
If 2020 taught the average person anything, it is the importance of diversification. And not just of one’s portfolio, but one’s career as well. Soon after the pandemic began, people realized that they needed a second source of income – something on the side – that they can fall back on if they lose their primary job or times get tough in the future.
Examples included:
- Accountants providing out-of-hours tax preparation services
- Teachers offering weekend tuition
- Industry experts writing books in their specialist field and collecting royalties
Invest In Yourself
The biggest asset you own isn’t your car or your house – it’s your brain. That’s because your brain has the ability to generate massive value for both yourself and the people around you long-term. Thus, investing in it can pay off tremendously.
There are all sorts of ways you can invest in yourself. These including:
- Enrolling in an online course
- Going back to university
- Taking professional exams that grant access to high pay grades
Pay Off Debt
Paying off debt is another great investment because it negates the need to continually pay creditors interest on loans.
2021 looks like it is going to be very unpredictable. With inflation rising, there’s a high chance that central banks will begin increasing interest rates. And this will mean that you’ll have to pay more money on your loan repayments every month. So getting rid of debt now helps to mitigate this risk and keep your finances healthy.
Buy Real Estate
Real estate prices have also been turbulent this year. But the market is still growing strongly if you know where to look.
When investing in property, try not to speculate on future prices. Instead, find assets that you can rent out for a reliable and high rate of return.
Also, try to avoid managing your real estate yourself if you don’t have any experience in it. For instance, if you’re planning on renting a vacation home on the West Coast, use rental management in California to take over the day to day work for you. Take their fees into account when calculating your overall rate of return.
Buy More Stocks
If you have spare cash lying around, now is a great time to buy stocks. Remember, stocks are a great inflation-proof asset. Companies are the entities in the economy that raise their prices to match inflation. And so as their profits rise nominally, so too does the value of their shares.
Put More Money Into Your Retirement Plan
Lastly, if you have a retirement account, 2021 is the year to start putting even more money into it. Having a tax-deferred account is critical because it prevents you from having to pay tax up front on money you invest, allowing interest to accrue more over the long term.