Editor’s note: This article was first published in February 2011, as an outlook for that year. Its forecasts, the 2010-2011 Spanish deposit war with rates above 4%, and its remarks on falling equity investment all describe early 2011. Spain’s IBEX 35 lost about 13% in 2011.
2011 is shaping up to be one of the most unpredictable years for stock market investing, although in my view the stock market is still the most profitable investment. It’s simply a matter of choosing a good moment to buy into a particular stock and having a good exit strategy.
According to reports from fund managers, although investment in equities has fallen, investment funds made up of emerging-market holdings have been gaining acceptance and are selling quite well with investors.
We’re entering a phase in which we know the risk of investing amid such high volatility. So, for those who don’t want any risk, the war over fixed-term deposits is still on, with annual returns above 4% and in some cases above 5%. The banks benefiting most from this inflow of new money are probably the online banks.
Because the Spanish stock market is so… unpredictable, investment on Wall Street and the Nasdaq is growing since, as you probably know, you can invest in them from Spain (or from any other country).
Banks are still selling their rip-off investment funds, so once again our advice is that the best investment fund is the one you build and diversify yourself: x% in equities and x% in fixed income, as long as you’re clear about which stock you want to invest in. As a last resort, you can choose a fund from a management firm that works hard to build good funds. But these days, unless you’re a private-banking client, don’t choose an investment fund offered by a bank. Read more: What you need to know about investment funds, so your bank doesn’t rip you off
See also: 12 apparent contradictions that are actually true: understanding people
Investing in businesses is on the rise again, specifically internet businesses. These days, if you know an entrepreneur with fresh, innovative ideas, investing in their project could be very profitable. After all, you’re investing directly in a company, just as you would on the stock market.
In short, the stock market is stable, but a fall is expected during 2011. Keep an eye on the news and, when it happens, pick a stock in a company with good plans for the future and go for it, unless the fall is caused by a bailout of Spain, in which case the strategy would be very different.
Further reading:
- Why the stock market is the most profitable investment
- How you can go broke investing in the stock market
- Common mistakes when investing in the stock market
- The most serious mistakes when investing in the stock market
- How to invest in the US stock market
- What Arthur Rock looks at before investing
- Company mergers: the best time to invest
Featured image: Fernando, CC BY-SA 4.0, via Wikimedia Commons.
