The current situation in the economy causes two opposing views from different experts. Some see growth of 4.1% in the second quarter of 2018, the beginning of a long period of economic recovery, and others – only a short outbreak. Of course, when it comes to investments, interested people would like to understand more precisely what this growth is, but the results can be expected for many months, or even several years, when most of the opportunities will already be lost. Although investing does not tolerate impulsive decisions, too cautious approach to it usually does not bring anything but expenses when the market begins to be corrected.
So how then should investors behave in this situation? Some of the richest people in the United States have an idea about this and that is what they can advise.
Understand the opportunities
While riskier assets that have yielded high returns over the past 10 years are working, continue to invest in them in order not to lose money on their sale, while not expected a significant increase in consumption in most countries. Inversion of the yield curve, when the most powerful time for the stock market comes, has not yet come close, so there are still many opportunities. The yield curve shows the difference between long-term and short-term bonds in respect of costs. It is worth actively observing such an economic indicator, because when the onset of the yield curve inversion occurs, after a short period of time a market downturn happens, that leads to a decline in profit.
Do not keep eggs in one basket
Stocks, that are growing rapidly, can also fall sharply. The shares of various fast-growing companies remind us about this periodically. However, while consumer solvency is at a fairly high level, it is worth making investments in a business related to the production of consumer goods, their development and the financing of purchases. In addition, last year’s changes in financial rules and tax breaks, gave a head start to profits before rising prices. Despite global conflict threats from Iran, North Korea and the complication of relations with Russia, as well as statements by President Trump, the economy as a whole, and the market in particular, have hardly responded to these events, thanks to the growth of companies and consumer demand for their goods and services.
Experts say that the inflection point after the recovery is not far away, but it will come, not today and not tomorrow. Perhaps we still have more than one year to invest in growing businesses and growing markets. Also, investors should not forget about the valuable shares, which usually do not show high yield, but provide reliability.
Despite a fairly tough policy and Trump’s statements regarding the largest trading partners from the European Union and China, most analysts consider him a powerful negotiator, and his statements about new tariffs are a tool in the negotiations in order to achieve additional benefits. Replacing multilateral trade agreements with bilateral ones will help make trade deals more profitable for the United States.
On the other hand, while the result is only expected, and what it will be not yet known, it makes sense to make investments in companies that are less dependent on certain sectors of the economy. The best option is a combination of stocks of various types of companies.
Consider tax implications
When choosing an investment instrument, in addition to the expected return, do not forget about the tax consequences, which in some cases can reduce the profits from the shares of some companies close to zero. The fall in Facebook shares this year by almost 20% made many people think about this issue, since the sale of expensive shares entails high taxes. This should not be taken as a template, as well as avoiding shares of the Big Tech industry, but periodically reviewing their investment portfolios is what really should be done regularly in an ever-changing market environment. The largest modern players in the stock market, no matter what industry you take, should not limit your investment portfolio.
Diversification implies a slightly broader concept.
This were investment useful tips from our service. Nevertheless, you should try to properly assess the risks in order to avoid significant losses. If you think that the value of the company’s shares will continue to fall to the level when the amount you have to pay to the tax office will kill any interest, then it makes sense to get rid of such assets.