Every investor wants to maximize his returns on investment within the shortest possible time. At the same time people have natural tendency to undertake minimum risk. The fact is that both the returns and risks are directly proportional. Lower the risk, lower will be the returns and higher the risk, higher will be the returns. Covid 19 pandemic and many other mishappenings such as Australian wildfires, job losses, market crash, cyclones, floods, riots etc. has made this year historical. We have experienced so much this year which normally people get to experience in their lifetime. In these challenging times, which are the best asset classes for investment? On which assets should we bet to give us maximum returns? Following may be the best investment options for 2021:
Gold and silver: We love every opportunity to hedge against the government .Hedge means to make an investment that protects you against a financial loss. Basically we invest more in alternative assets like gold, stock markets and crypto currency etc .If the government starts printing money like crazy then the price of gold, silver etc goes up and our wealth increases once again. Hedging your investments is a great way to secure and grow your wealth in the long term. In 2019, gold has given an average return of 18%. In 2020, the year to date return of gold is close to 30%. Silver has also given return of about 30%. Alternative assets will be an incredible investment as long as governments keep printing new money. With 2021 around the corner, we are more than likely to see another round of financing trying to revitalize economy. It would be wise for investors to bet on gold and silver.
Real Estate: Real estate is the best investment in medium and long term. Investors get very good appreciation from their investments in properties. Normally, people have tendency to keep waiting for property prices to go down. Smart people have already started acquiring properties during this year. The pandemic this year has forced many people to sell premium properties at discounted prices. The pandemic has proved to be once in a lifetime opportunity to acquire undervalued great properties. The next year is probably going to be another great year for real estate prices since interest rates are low. Most of the banks and financial institutions are giving loans at very low rates with attractive offers. There’s a golden rule of real estate is “The profit is made when you acquire a property”
IT & Big Tech: This has been the biggest year in the tech. The whole world was busy trying to figure out different ways to work from home. Skype, a company that has been the main video conferencing software since we can remember has been crushed by a new company called ZOOM .People purchased products online. For restaurants food delivery has become the main revenue source. The data consumption by all of us has increased tremendously. Most of the big tech company stocks have given 30 to 50 % returns. Netflix at 50 %, Apple at 60%, Google, Facebook, Microsoft- all around 30 to 40 %. The biggest return was given by nVidia, the biggest graphic card manufacturers and their year to date return is at 125 %. Companies like TCS, Infosys and HCL Tech have also given handsome returns to the investors.
Pharma & HealthCare: During a medical pandemic, as you would expect pharma and everything to this field has blossomed. Every big company started competing in a race to get first to a vaccine and we already have three big winners. Mass production of their own version of vaccine is being eyed by Pfizer, Moderna & AstraZeneca . The biggest winner out of the three is Moderna with a year to date returns of 450 %. Most of the pharma companies are giving good returns. At the same time the companies in pharma and healthcare segment will be reporting very good business figures. Although, we may have the vaccine in the coming months, but still this sector will grow at an accelerated pace due to huge demand next year also.
Electric Cars: Electric cars have emerged as one of the biggest winner in the stock market across the globe. They have given incredible short-term gains. Tesla’s year to date returns is 650%. If you invested $10000 in Tesla stock at the beginning of 2020, now you would have over $ 65000. That’s really mind blowing figure. Have you heard of Nio? Nio is basically China’s version of Tesla and the one most likely to win the electrical vehicle market there. NIO’s year to date returns is 1250 %. If at the beginning of 2020 you invested $10000 in NIO stock you would now have over $ 125000. If one would have paid attention to what was happening in the electric vehicle space, one could have become a millionaire in 2020 with an investment of $ 70000 to $$80,000 Investments. Still a lot is happening in this segment and the growth momentum is going to continue in the coming years.
E-Commerce and consumer staples: When the pandemic hit all small businesses were worried about survival, but what did the consumers do. Most of the people stocked up on groceries, consumer durables and other necessary items of day to day requirements. Remember when government gave free money, where did that money go? A lot of groceries and consumer durables were purchased through Amazon and other large chain grocery stores. Amazon’s year to date returns is 72% for Walmart it is 40 %. This has been happening throughout in all countries.
Renewable energy: The renewable energy space as a whole will be one of your safest bets. All the nations in the world are focusing on renewable energy. Everything that has to do with solar energy and wind energy is booming. You would have probably seen campaigns even in your country where your main energy providers are boasting about how much money they are investing in renewable energy. This is where the future lies .As the technology gets better and better, higher this segment will grow.
Travel & Hotel stocks: Basically the entire hotel industry has been shattered by the corona virus situation. Once the vaccine becomes largely available, we will see a steady increase in tourism as more and more people look forward to a new holiday after this quarantine period. Hilton, Hilton Grand Vacations, Marriot and MGM provided us over 100 % returns. We can also bet long term on airlines, but the growth hasn’t been that impressive. About 6 to 12 months from now everything travel related will see a jump as travel picks up.
Invest in Yourself: An investment in yourself pays the best dividends, but what does it mean to invest in yourself? There are 3 big segments you can focus on if you are looking to grow financially. i) Invest in your physical and mental health. Of course, it cannot be a lump sum investment. It must be a regular investment in SIP mode. If you are not healthy you won’t be able to do anything else and in a year like 2020, those who had previously invested in their health have seen it pay off. You also spend a lot of time inside so your mental health needs to be on point for you to be able to overcome situations like the one we find ourselves in at present. ii.) Invest in relationships: They save you money and time and help you grow, when otherwise you would feel stuck. Invest in growing and maintaining your connections. iii) Invest in what you know, understand and are able to do: Whether or not you are going to be successful in this life depends on how much knowledge you are able to deploy- it’s that simple. Either you know how to do it and then do it, or you are left on the sidelines. Your rest of life can be changed by a single idea or a single decision . So, invest in yourself to reap the best returns in your life.
Navin Kumar Singh
Chief Manager (Faculty)
State Bank Institute of Learning & Development ,Bhavnagar.
