First off, we would like to wish all readers a Merry Christmas and a Happy New Year, and we hope your 2015 has been an awesome and bountiful year!
For the upcoming year, there will be many interesting opportunities, and the key is to build up a strong portfolio that will continue to perform well for years to come. Without further ado, let’s get down to the top 5 investment ideas for 2016:
1. Build up your War Chest
With the recently increasing interest rates, loans and interest payments will continue to get more expensive, so it makes sense to try and pay off your outstanding loans and debts.
The next step is to accumulate your war chest, by selectively investing in the right products, while at the same time holding sufficient cash on hand to capture new opportunities as they surface throughout the year.
In other words, do not be too eager to dump all your cash into investments all at once.
2. Be cautious of fixed income products
No that the trend of interest rates have changed, and are coming up from an all-time low, this might spell the end of the 30-year bull market for bonds. Hence, I will only be allocating a very small portion of my portfolio to this.
The only exception to this is if you are planning to purchase a fixed income product (such as a bond) with the intention of holding it to maturity, and you are contented with the fixed yield that this product is giving you. In other words, you are not expecting any capital appreciation gains.
3. Invest in the Right Currencies
With the US being the first to raise interest rates, we can expect the USD to strengthen against most other currencies, such as the Euro, Pound, Australian dollar, New Zealand dollar, and the Asian currencies (including the SGD).
This is especially likely since countries like the EU, UK, Australia, New Zealand are still planning to cut rates or have some similar operations that will continue to weaken their respective currencies.
Major funds are also likely to divert their funds into investments denominated in the USD, causing an outflow of funds from the Asian markets, which will negatively impact both the currencies and stock markets of these countries.
Hence, in the medium/long-term, I would prefer to be long the USD, or have net long exposure to it.
4. Focus on the Global Stock Market
Earlier this month, I did a post to forecast the movements on the Singapore stock market (Straits Times Index), and it did not look pretty.
Now compare that to this chart of the S&P 500 representing the US Stock market. This definitely looks more bullish, doesn’t it?
For lazy investors like me, you can gain exposure to the US stock market simply by purchasing a low-cost ETF such as the SPY, and it will give you exposure to the USD as well.
For those who are willing to go one step further, you can check out the SPDR sector ETFs to pick out the stronger sectors, such as technology and healthcare. I will be looking into this during my next monthly portfolio update.
5. Commodities could be the dark horse
Commodities have taken quite a beating for the past few years, especially oil, due to a combination of political and macro-economic factors. In addition, a bullish USD is not good for commodities as well. That is why many analysts have been very bearish on commodities, including Gold, Silver, Copper, etc.
All asset classes move in cycles, and I believe that commodities will not stay down forever. In fact, this might be a good time to accumulate them on the cheap. My general strategy for this is to gradually accumulate more of these using diversified ETFs (such as GSG) as they fall lower, which is also part of my portfolio rebalancing strategy, and I am prepared to wait 3-5 years for them to appreciate in value when the cycle changes.
Of course, it would be a bonus if they start to turn up earlier within 2016.
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We hope that you have enjoyed this article, and are psyched up to start tackling the market in 2016. As an extra bonus, we have included some ways in which you can generate additional sources of passive income to build up your war chest and grow your portfolio faster.
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Seats are very limited, and we expect all slots on the trading floor to be filled pretty quickly, so for those who are keen, drop by for out next seminar to find out more, and reserve your slot if you are keen to join us. Check availability: http://synapsetrading.com/events/training-workshops/
Next year is going to be the year which our passive income is going to explode massively, not just for me, but for all my students and those who are hungry for success. Wishing you all the best in your financial success for 2016!
P.S. If you found this article useful, please share it with a friend who is interested in getting started in investing! 😀