When you’re new to investing, the sheer number of options available to you can feel overwhelming. Should you choose stocks, bonds, or securities? Should you select a pre-balanced package deal or fund? How can you establish the quality of any given asset, and how can you track assets over time?
It’s no secret that well-judged investments can be highly lucrative. Sigurður Bollason has enjoyed success through his investments in the finance industry, especially insurance, and through his investments in fashion. Spreading your money across multiple sectors like this reduces your overall risk.
As a new investor, you may want to play it safe to begin with, allowing time to find your feet. One of the safest sectors to opt for in this situation is consumer basics, sometimes called defensive consumables. This is because it’s comprised of products that people will always need to buy: food and drink and other essential items that are quickly used up and have to be replaced. Because they will only ever need so many of them, the overall market doesn’t experience dramatic highs any more than it experiences dramatic lows, but as you get to know it, you’ll find that there’s good money to be made if you can accurately predict the success of new product types, brands, or outlets. The stability of the sector makes it easier to understand why individual investments perform as they do, making it easier to learn.
One of the most promising sectors to invest in in 2018 is transport, and there are lots of options in this sector that are well priced for newcomers. New infrastructure problems are getting off the ground in several major US cities, and this in turn is encouraging the development of public transport networks. Because they’re public assets (though they may still involve private companies), their behavior is easier to predict, as city, county, and state governors have to be more open about their financial situation and their plans than private companies do. Not only is this a positive area for growth, but there also are burgeoning opportunities in European cities, where the transport market – including planes and trains – has been growing comfortably ahead of other areas over the past two years, and shows no sign of slowing down.
Another sector that’s booming at the moment is technology, especially information technology and related hardware. Businesses can rise and fall quickly in this area, so you’ll need to be cautious about those yet to get established, but the extensive amount of journalism surrounding the sector makes it easier to connect with as a newcomer than one where you have to rely entirely on formal market reports, and it’s easier to use your common sense to work out what might or might not be viable. This will give you the opportunity to observe how marketing campaigns and wider social factors affect the changing value of an asset. You can balance riskier investments by investing in shares in the companies that already dominate their areas of this market.
Like consumer basics, construction is always necessary, but at present it’s also going through what experts believe are the early stages of a boom. Investment in infrastructure in the US, Canada, and parts of Europe is creating strong opportunities for investors. There’s a lot of information in public records establishing where big developments are scheduled to take place, and tracking factors such as road, school, and supermarket building can help you predict where new residential and commercial buildings are likely to be needed or where neglected areas are likely to undergo reconstruction. Because most construction companies operate on a fairly localized basis, this can help you predict which are likely to expand and increase production, enabling you to make good predictions about assets with a good chance of high growth.
Sectors to stay away from
Some traditional sectors are not doing well at present, so even if you’ve heard good things about them in the past, as an inexperienced investor you should be cautious.
- Energy – the drop in oil price in recent years means that prices are low, but they are not expected to rise significantly in the near future and many companies are struggling to ride out the slow period.
- Health care – uncertainty around Obamacare has now been replaced by uncertainty around replacing Obamacare, and stock prices are fluctuating in ways that are difficult to predict even for experienced investors.
- Cryptocurrencies – the Bitcoin bubble is now close to bursting point despite attempts to shore it up, and when it goes, it’s likely to undermine confidence in the whole sector, which has no underlying asset value.
As a new investor, you should be aiming to keep risk low while seeking out opportunities to learn. This will help you to develop the skills that you need to successfully undertake more ambitious investments.