Gold is often seen as the go-to safe-haven for investors looking to diversify their holdings and reduce the risk to their portfolios. So in times of economic instability, gold is a popular purchase. The price of gold has seen some recent highs because of continued friction between the US and China, along with worry regarding the coronavirus outbreak.
My concern with buying gold as an investment today is that it’s getting too expensive. For those gold hunters who bought back in June, they’ll have made significant gains, but I don’t think it’s a good buy now that the price of gold is already high.
Slippery slope
Oil is another commodity that has seen a nicely rising share price in recent months, only to suffer a pullback over fears of the coronavirus becoming a pandemic. Oil is a very volatile asset that regularly experiences share price fluctuations.
It’s also facing mounting pressure from eco groups and ESG funds looking to escape the clutches of fossil fuel investments in favour of environmentally-friendly or sustainable alternatives that will benefit the planet in the long run. I think this makes it a less attractive investment for 2020.
Buy-to-let
Home-ownership is popular in the UK, much more so than in many other European countries. This popularity has extended into buy-to-let properties as an alternative to a pension income or as a passive income stream.
However, I don’t think it’s as easy or as desirable as it may at first seem. There’s a lack of liquidity in the property market. This means during an economic downturn, it can be hard to sell or rent your property. There are ongoing maintenance costs and management fees, not to mention the legal charges and steep transaction fees too.
Overall, buy-to-let is a big undertaking that requires large capital outlay. It’s not one to take lightly, particularly if you’re not very experienced in the property game.
£20k in 2020
If I was to invest £20k this year. I’d be looking to follow in Warren Buffett’s prosperous footsteps. Billionaire Buffett is one of the most successful investors in the world.
He looks to invest when others are fearful of the markets. So when commodities like gold are rising in price, he suggests the stock market can be a great place to pick up bargains.
Between the FTSE 350, top international stocks and various index tracker funds, I think any UK-based investor could easily build a diversified portfolio.
If I was starting today, I’d consider FTSE 100 companies such as Diageo, Unilever and Tesco as good stock picks for 2020. Each of these is long-established, with room for future growth and reliable dividend yields. I’d mix them with a FTSE 100 and a FTSE 250 tracker for both growth and income. For further diversification, I’d consider the rising popularity of UK-based sustainable funds.
I’d store these investments in a Stocks and Shares ISA, which has a £20k annual limit. This allows you to save £20k per year and pay no tax on your capital or on the gains it realises.
I like Buffett’s approach because it’s simple but effective. Approaching stock market investing with patience, discipline and a positive mindset can set you on the road to a passive income and financial freedom.