Best Ways to Invest Your Money in 2020 According to Venture Capitalist Pratap Kondamoori
A new year and new decade are upon us, bringing with them renewed optimism and hope for humanity and what the future might hold. Yet for all the promise of what tomorrow might bring, there is also a great deal of economic uncertainty. Fears abound that a recession is on the near-term horizon and that technology could lead to mass unemployment in the not-so-distant future.
Thus, as we cast our eyes towards the future with thoughts of what the world may be like in the decades to come and what our place will be in it, so too must we look at the path our financial destiny is on, which will play a major role in the position we’re in at that time.
Experienced investor and venture capitalist Pratap Kondamoori, who has been a consultant to various clean technology ventures over the years with the goal of supporting promising climate change-fighting initiatives, says that small financial sacrifices now can lead to big dividends later.
Pratap, who co-founded the technology company Nuko which later spun off three other successful tech startups, says that while the world’s technological landscape advances at a breakneck pace, the core tenets of investing have remained largely unchanged for decades.
Hedge fund billionaire Warren Buffett, the world’s third-richest person according to Forbes with a net worth of $88.4 billion, still successfully uses many of the same value investing principles that were pioneered by his mentor Benjamin Graham nearly a century ago.
That’s a great thing according to Pratap Kondamoori, as the investing knowledge you gain today should still have value decades from now, making it a great, dare we say, investment. The tech revolution happening around it has also made investing easier than ever, as you can manage your stocks and other assets online and get instant updates on your smartphone.
Pratap shares some of the best ways to invest your money in 2020 and recommends that at least two of them be used to diversify your portfolio or improve your finances.
Play the Stock Market
After hitting a rough patch in 2018, the stock market had a banner year in 2019, making up all of those losses and much more. The Dow Jones and S&P 500 each gained over 20%, while the Nasdaq rose by over 30%.
There are nearly always short-term concerns about the stock market and whether it’s currently overvalued, and that’s certainly the case now, as some believe a crash is imminent following the big gains of 2019. Pratap Kondamoori recommends shutting out that noise and taking the long-term view, saying there’s no reason to suspect that you won’t make money owning stocks long-term, assuming you make your portfolio diversified enough.
That too is easier than ever to do through low-cost ETFs, which bundle together dozens or hundreds of stocks, often in themes. Some ETFs mimic entire indexes of stocks, letting you own an atom-sized chunk of a broad section of the stock market through just a single investment.
That said, if there are better near-term options, such as paying down credit card debt or growing your job skills, it could be a good time to hold off on putting much money into stocks.
Buy Real Estate
Real estate hasn’t traditionally been a great investment, widely trailing stock returns between 1890 and 2018. The real estate market has changed quite a bit compared to much of that period, with homes commanding a greater premium than ever as cities run out of land to build on and populations explode.
If the stock market experiences a drop in the near future, the housing market could also receive a boost. Prior to the 2009 housing crisis, the Case-Shiller Home Price Index rose during all but one of the bear runs the stock market has had since 1950.
The housing supply hit a record low towards the end of 2019, with demand being particularly high on the low-end of the market.
Pay Off Your Debt
Investing in yourself by paying down your debt is often one of the best moves you can make says Pratap Kondamoori, with the potential for annual “returns” of 17% or more, depending on the interest rate you’re paying on it. You won’t find a better guaranteed return on your investment dollars anywhere on the market.
Paying down debt is particularly important to get out of the vicious cycle of compound interest, which is essentially putting the power that Warren Buffett used to make billions against you. Americans pay over $100 billion in credit card interest each year, a figure that has jumped by over 30% since 2013, while student debt has also exploded into a $1.5 trillion crisis.
Grow Your Job Skills
Automation and AI are nipping at our heels, threatening to do our jobs better than us and without needing pesky things like breaks and trips to see men about horses. Learning valuable job skills that are unlikely to be disrupted by technology is a tremendous investment which will set the foundation for your future earning and investing potential.
The most direct path to those skills is through college, which is still worth it despite the hefty student debt you’ll incur. Although it’s skewed somewhat by those on the upper end, college grads do make $30,000 more per year on averages than non-grads. If you have a plan to quickly pay down your student debt, then even better.
Buy Investment Bonds
Investment bonds are another solid option for growing your wealth, being relatively safe and providing low-to-good returns. Government bonds have ironclad safety but pay the lowest rates, with yields currently around the 1.6% mark.
The yields on the bonds issued by companies can be much higher on the other hand, even pushing into double-digit territory in the case of high-yield bonds. While those particular bonds have a reputation for being overly risky, Pratap Kondamoori says they actually have better overall returns than investment-grade bonds and can even lower your overall portfolio risk.
The bonds issued by larger companies typically pay in the 5-6% range, which isn’t a bad return for a bond that likely has minimal risk of default.
Regardless of which options you choose, keeping an eye on your financial future in the modern maelstrom of consumerism and excess will ensure it’s a much brighter one for you and your family.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.