Deeper dives on diversification, wealth-building, and making the most of every investment
January 7, 2020
One of the most difficult tasks for every investor is finding the best sectors to focus on every year. Though many experts suggest that investors should focus on investing in sectors that they know well – for example, the sector that your company is part of – others hedge their bets by diving into up-and-coming sectors. With enough intensive research, you may be able to understand a sector well enough to make educated decisions on what companies to invest in. Here, you’ll find three interesting stock market sectors, industries, and emerging subfields that may grow rapidly in 2020.
The real estate sector is one that has been of particular interest to investors for decades. But recently, investment trusts have started booming. Real estate investment trusts, or REITs, are a way for investors to invest in property without actually buying the physical locations themselves. Buying shares in REITs gives you exposure to the physical properties that the REIT owns (and their portfolio value), thereby giving you some ownership over their funds without having to make hard decisions about individual property ownership.
Most REITs also pay dividends to stock owners, acting more like ETFs and mutual funds than other stocks in the real estate sector. Lease-based REITs focus on properties leased to tenants instead of owned by tenants. These types of REITs are likely to increase in value in 2020. This is because rent prices throughout the United States are expected to increase significantly. Furthermore, administrative task automation for these REITs is on the rise, cutting employee costs and raising returns for the most forward-thinking funds.
Investors can also look to public, non-traded REITs like DiversyFund’s Growth REIT for higher-than-average returns and low volatility. Since this option is not traded on the public market, it offers investors an opportunity to diversify and add alternatives to their portfolios.
Even though healthcare has had a tumultuous decade due to political tension and potential upheavals in business models, biotechnology is booming. As DNA sequencing costs fall and scientists begin to understand more about precise genome editing, new potentials for health and industry-wide innovations are possible. Small companies are leading the way, developing biotechnology through artificial intelligence that scans through thousands of species to find specific molecules that may act as new pharmaceutical agents.
With plenty of promising clinical trials concluding in 2020, large pharmaceutical companies will be eager to acquire some of these novel products. Considering that the production of new drugs has slowed to an all-time low since FDA regulations were introduced, innovative drugs and curative agents will be in high demand. Many small biotech companies are public, and with proper research, you can understand the basic principles of the products they are developing. Even better, most of these companies provide peer-reviewed journal articles showcasing their results; allowing you to dive even deeper into their methods and products. With this understanding, you’ll be able to make informed decisions on which companies are most likely to be acquired or successful on their own.
Emerging markets have always been considered risky places to invest, but with greater transparency due to widespread Internet access, this sector is far more reliable than it ever has been. With the omnipresence of mobile phones connected to the internet, finance-based businesses have figured out how to provide service to these customers without needing many physical locations. These companies have also actively learned how to collect reliable data on their customers to ensure loans and services are not being wasted on non-valuable customers.
When the advances made by these companies within emerging markets are combined with the United States’ current interest rate reductions and the introduction of the European Union’s various financial stimulus packages, emerging markets are likely to see a significant uptick in currency value. This currency value increase will correspond to a greater usage of online banking and financial services, boosting the reputation of these companies and cementing their place in those countries’ financial systems. Finding strong and easily accessible emerging markets is a key play in 2020, and specific financial services that are achieving market saturation within those emerging markets might be great places to invest in the near future.
While standard sectors in the stock market like commodities, technology, and essential consumer goods are likely to be relevant to investors in 2020, these may not be the best places to look for maximal profits. If you’re looking to spice up your investment portfolio in 2020, it’s time to study new sectors. Intensive research into the history of these sectors, the current market sentiment, and a host of other financial metrics is imperative for finding the best investments. Whether you decide to invest broadly in biotechnology, dial in on specific emerging market financial services, or hedge your bets with REITs, you’ll be sure to find a solid investment for the coming year.