The first month of 2019 is over and some of us are yet to figure out our financial resolutions for the year. It is important to identify the areas in which you are looking to invest before it is too late.
In order to make the task a bit easier for you, here are three investment tips to help you in your research, in case one of your goals for the year is to improve your financial health. But before we delve into the details, let us first understand how the economy fared last year and what is expected out of 2019 and thereafter.
Glimpse of the U.S. Economy
The political and economic scenario in the United States was highly volatile in 2018. So what went wrong last year?
Let us begin with the $1.9 trillion tax cut of December 2017, which resulted in a jump in investments in the first half of 2018. However, major incidents and growing speculation of an economic slowdown made the investment boom vanish by the third quarter.
The U.S.-China trade war, the massive data breaches, and cyber warfare threats rocked various industries, particularly technology, resulting in a flurry of institutional sell-offs. Consequently, the gains recorded by the S&P 500 and Nasdaq stocks in the first half of the year were wiped off.
However, a strong labor market outlook and an expected GDP of 2.5% for 2019 means that it is likely to be a Goldilocks economy this year, which is healthy.
Another good outcome of the government’s policies is that after many years of steep raises by insurance companies, premiums are anticipated to fall slightly in 2019.
The Federal Reserve increased interest rates three times in 2018. However, in the announcement on Jan 30, the Fed temporarily suspended its plans to continue interest hikes for 2019. The rates, which range from 2.25-2.50% currently, are likely to remain the same for some time.
Despite the halt in the rising trend of interest rates, banks and insurers are expected to continue to benefit.
Tip 1: Invest In Insurance
If we shift our attention from interest rates to an improving labor market, we can safely conclude that it will be able to boost policy sales even at higher premiums. The unemployment rate is expected to drop to 3.5% in 2019, which should perk up demand for life insurance and annuity products.
The expected fall in premiums makes this investment idea even more attractive.
Furthermore, apart from getting insurance, you can also consider investing in a couple of insurance stocks that are positioned well to reap profits through underlying potency and business modification, riding on rising interest rates, brisk annuity business, solid labor market, and adoption of advanced technology. Investing in stocks with promising long term earnings growth rates, like First American Corporation FAF and Manulife Financial Corporation MFC, are likely to give you good returns on investment.
Tip 2: Invest in Rainy Day & Retirement Funds
Hard times can come without any warning. Speculation about an upcoming recession in an economy that is still reeling from a rocky ride last year adds fuel to the fact that setting up emergency funds and retirement savings should now be at the top of the priority list.
An easy way to figure out how much money you need to set aside for financial emergencies is to calculate your monthly expenses including medical, grocery, rental and other miscellaneous bills. Multiply this figure by the number of months you expect to find new employment in case of a job loss. The result you get will give you the amount you need to invest in an emergency fund. Let us understand this figuratively.
Let us assume you need $2,000 to cover all your expenses for a month. Now, considering you have the skills necessary to find employment in six months, your total amount in an emergency fund should be six times $2,000, or, $12,000. This should provide a decent buffer for you in the time between an event of job loss and re-employment.
There are a few online emergency fund calculators that you can refer to for guidance.
Tip 3: Diversified Investments
After securing yourself for any medical or financial emergency, now it is time to improve your financial health. There are numerous ways to achieve this but here we have picked two options— investing in ETFs and Peer-to-Peer Lending.
You’ll likely have been warned not to put all your eggs in one basket. Both the aforementioned investment options go by this rule. Let us first talk about the more common one — ETFs.
ETFs, or exchange-traded funds, have gained significant traction over the last several years. They are structured in a way that your invested money is spread across well-performing stocks, focused on a specific sector, which is poised for future growth.
Investors could consider the SPDR S&P Dividend ETF SDY and the SPDR MSCI USA Strategic Factors ETF QUS, which focus on quality more than quantity. You can also choose among several other preferred ETF funds for 2019, which are well positioned to grow.
Now, coming to the less conventional method, Peer-to-Peer Lending can lead you to reap significant profits by offering your money as a loan to individuals and earning interest. There are various platforms like Lending Club and Prosper through which you can lend your money. The risk is minimized because your invested money is broken into small amounts and lent out to various individuals. However, it is advised to opt for this investment only if you have money to spare.
Free Tip: Invest in Elderly Healthcare Industry
The resolution to better manage your finances calls for a free financial advice.
Per the World Health Organization, the senior population (60 and above) is expected to reach 2 billion by 2050, approximately 22% of the global population.
Therefore, the need for higher acuity patients to be taken care of in a home nursing environment should drive demand for home healthcare services. You can consider investing in the following stock.
Amedisys, Inc. AMED is a leading provider of healthcare in the home with a vision of becoming the premiere solution for patients. The expected long-term earnings growth rate is 18.76%
All said and done, there are numerous other ways in which you can bring discipline in your finances. It is important to do your research and make your choices carefully, keeping your priorities and requirements in mind.
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SPDR S&P Dividend ETF (SDY): ETF Research Reports
Manulife Financial Corp (MFC) : Free Stock Analysis Report
First American Financial Corporation (FAF) : Free Stock Analysis Report
Amedisys, Inc. (AMED) : Free Stock Analysis Report
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