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Stock Market investment opportunities in 2020


11th Feb 2020 Managing your Money

Stock Market investment opportunities in 2020

There are many ways to invest in stocks and thousands of stocks to choose from. This article will summarize the basics of the market, look at the different methods used for stocks investing and trading and give you some examples of industries and stocks to look out for in 2020.

How to Invest in Stocks

Buying stocks

By buying stocks an investor actually owns a certain stake of a company. He then stands to make a profit or suffer a loss based on the performance of that company. This is represented by the difference between the price paid for the stock and the current price on the market.

Buying stocks involves the creation of an account with a brokerage firm. Important factors to consider when selecting a brokerage include account fees, trading commissions, deposit options, withdrawal policies and instruments available.

Stock Mutual Funds/Exchange-Traded Funds (ETFs)

Stock ETFs are investment instruments that consist of several stocks chosen by professional money managers or entire indices like the S&P 500.

Many investors prefer ETFs because they are diversified and not subject to the same volatility that comes with individual stocks.

Contracts For Difference (CFDs)

A contract for difference (CFD) is a derivativeproduct. This means that it is a trading instrument that allows a trader to try and predict the price difference of a stock without actually owning it. The instrument is based on a contract where the buyer agrees to pay a certain price upon expiry. A short position is taken if the buyer believes the price will fall, while a longposition is taken if the buyer believes the price will go up. At contract expiry, the difference is either paid out by the trader or the broker, depending on the end price and position taken.

To buy stocks CFDs online you have to open an account with a CFD online broker. When choosing an online broker it is important to make sure that the broker is licensed by a reputable regulatory body like the Cyprus Securities and Exchange Commission (CySEC) and offers a safe, secure and fair trading conditions and fees.

CFDs are considered a high-risk investment and must be traded with caution.

General Market Trends in 2019-2020

The United States has the largest stock market in the world, leading with over 50% of total activity.

According to analysts, stock performance for 2019 was characterized by record highs for some individual stocks and double-digit increases for some indexes, like the S&P 500. This index, representing the 500 largest U.S. companies, rose 29% to its highest point in years, giving it the best yearly return since 2013.

Optimistic analysts attribute this increase to moderate expansion in the U.S. economy, steady consumer spending, a solid labor market, and recovery of the housing market. In addition to these factors, the signing of several new trade agreements, such as the revised North American Free Trade Agreement (NAFTA) and the recently signed Phase 1 trade deal with China, has further renewed optimism in the United States economy.

Secondary to the United States in terms of volume are the combined activities of the European markets, which have also shown positive performance in 2019.

The Stoxx 600, representing 600 companies across 17 European countries, traded at a record high surging 24% since the start of 2019, representing its best performance in a decade.

On the downside, general news about forecasted downgrades have been common for 2019 with analysts predicting that profits for European companies may be slightly lower than US companies in 2020, according to Bloomberg.

Industries and stocks to follow in 2020

Thousands of stocks are available on the market across a wide range of industries that offer investors a wide range of options for diversifying their portfolio and many analysts that cover the market and share their analysis and predictions of the market. Here are a few examples of industries and stocks worth following in 2020.

Biotech is an interesting industry to follow in 2020 according to Morgan Stanley, though it is considered to be a volatile, risky industry.

In terms of performance, Goldman Sachs analysts estimate that the following sectors will outperform the S&P 500 index: energy, materials, industrials, consumer discretionary, real estate, and information technology.  

Goldman Sacks also mentions that the following companies have a potential to offer high 2020 EPS (Earnings per Share) growth rates: Netflix, Facebook, Bristol-Myers Squibb, Adobe, Amazon.com and Nvidia.

Final Words

Markets in recent years have been volatile, offering some profit opportunities but also a high risk of lose. To increase your chances of success in the stock market you should understand economic factors, engage in industry research, diversify investments and make responsible decisions based on your risk tolerance.

Trading stocks, especially with CFDs may involve a high risk and your potential losses may be substantial.