Top Five Actionable Insights for Investors in 2021
The economic downturn in 2020 created challenges for many investors, but sentiment started to improve towards the end of the year. This left many feeling positive about opportunities in 2021, with the new year heralding a fresh start. In this post, we’ll look at key insights for investors.
Although there is a long way to go for a full economic recovery, the early signs have been positive. As the world works to overturn a global recession, this has created openings for investors. Every portfolio is different, but we’ve outlined below five of the key actionable insights for investors for the year ahead.
Take Your Pick From the Stock Market – But Do Your Research
Not every sector is punished in an economic downturn, and 2020 proved to be the case once more. With conditions forcing consumers to change their behavior, some stocks and shares performed well despite the overall downturn in economic performance.
Some of those who profited in 2020 are also tipped to do well in 2021. These areas would include e-commerce, video-conferencing and on-demand entertainment. Experts have forecast a slow and steady revival, but with some bumps in the road along the way, some sectors will still find it difficult at first.
However, before plunging to invest in a sector that left 2020 on a high note, you’ll need to consider whether there’s any upside left in the price, or whether the stock has reached its peak. A more buoyant economy won’t also suit everyone, so winners could be losers in 2021.
This doesn’t mean there aren’t any options for those stocks and sectors as CFDs remain an alternative option. Going short means you can still profit even when a stock is reversing its fortunes. You can find more actionable insights by learning about CFD and how to trade in volatile economic conditions.
Quality Will Matter
For almost ten years growth and momentum have been the buzzwords, but in 2020 that changed. For the first time in nearly a decade quality became a priority.
High-quality stocks will in time outperform junk companies, but this isn’t anything new. As high-quality stocks will accumulate more value over time, the key to success is finding them while they’re still available at a rock-bottom price.
2021 is expected to continue focusing on quality, with companies who have the twin benefits of a strong balance sheet and a low valuation doing exceedingly well.
Look Out for Small Caps
Small caps are classified as companies with a cap of less than £500 million in the UK. They’re a volatile pick which tends to swing in and out of vogue. Due to this, they’re often left on the shelf and not viewed as a top performer.
This under-valuation means that in the right conditions, there is a lot of upside in small caps. Their smaller size means they’re a riskier bet, but with careful research, it’s possible for small investors to secure excellent returns.
If you’re still in doubt, just remember: all big companies were small caps at one point in their life!
Stocks Pushed Up By Macro Factors
In 2020, a highly unusual mixture of factors combined to create deeply unsettling conditions for investors. There’s nothing the market likes less than uncertainty; traditionally, poor news is often better received than no news at all!
The bitterly fought US Presidency and the impending Brexit deal were two enormous global events which dominated trading. While there remain specific questions in both areas, there are resolutions to both issues. The world knows who the next US President will be, and the UK has avoided crashing out of the EU without a deal.
All of this means that in 2021, investors will be able to capitalize on a calmer global environment, with less uncertainty playing havoc with prices.
The crash of the economy in 2020 meant that dividends went out the window for most companies as they were forced to protect their cash reserves. Those who have relied on support from the government and grants will have been unable to justify handing meaty payments over to shareholders.
From the second quarter of 2021, this phase is expected to pass with companies increasingly returning to business as usual – including payment of dividends. As with any recovery, payments are liable to be cautious at first, steadily increasing as companies gain confidence in their sustained upward performance. Hopefully, using these insights for investors can help you get off to a great start in 2021.