Just two weeks ago the spectre of uncertainty was haunting the stock markets, but not anymore. With Brexit now firmly underway, for better or for worse, equities are rallying and there couldn’t be a better start to 2020.
There’s more than one way to make investments work for us. For those of us who aren’t actively keeping track of how our capital is performing, I think funds are a great idea that let professional managers take the decisions for us.
But you are here, dear investor. So, my guess is that you are interested in actively investing in individual stocks. And we are the Motley Fool are constantly looking to making you smarter, happier, and richer by investing through exactly this route. This is how I’m starting investing in 2020 and aiming to retire early.
Macros as a signpost
As a disciple of macro-investing, I am first and foremost concerned with the overall state of the economy, which isn’t out of the woods yet. The latest three-month rolling GDP growth data for August–October showed absolutely no increase. While the pick-up in equities is definitely a good sign, it will be a while before stock market gains can translate into actual economic increases.
With this as the backdrop, I’m inclined towards high-performing defensives, which should hold our investments in good stead not just in 2020 but also the years ahead. Of these defensives, I am focused on the FTSE 100 set of companies, for the simple reason that they are least likely to go bust, which can’t be taken as a given for companies with smaller market capitalisation.
Betting on defensives
One of my top picks among these is Unilever. The FTSE 100 consumer goods company might sound like a contrarian call at a time when it has just revised down its sales guidance for the year. But the fine-print leaves me convinced that at this time in 2020, investors will already be laughing their way to the bank.
ULVR’s share price was down by 7% after it made the announcement and it’s not yet gone back to its previous highs. I would strongly encourage investing in it right away.
I also like GlaxoSmithkline (LSE:GSK), which recently became more optimistic about its profits, and that’s great news for the share price. Like ULVR, I have liked this share for some time. I first wrote about it around a year ago and its share price is up almost 31% since. And that’s not all. Its dividend yield at 5.1% is higher than the average of 4.3% for FTSE 100 companies. There’s more. Its price-to-earnings ratio, at under 20 times, is less than half of its peer Astra Zeneca.
I’d also buy cyclical shares in sectors like real estate when prices come off a bit. They have already run up quite a bit in the past weeks. But defensives are a good place to start planning for 2020 to retire early.