I was recently asked for my views on what investors can expect going into 2019.
I said the S&P/ASX 200 (INDEXASX: XJO) (^AXJO) will end 2019 at exactly 6,121.40 points and if it doesn’t I’ll donate all of my money to Financial Guide Dogs Australia…
In all seriousness, I said what I usually say and quoted the author Niels Bohr who noted:
“It is very hard to predict, especially the future”
With that in mind, I stared into my crystal ball and here’s what I expect to see in 2019 and beyond:
- Shares will still be your best bet for the long run. Some studies have shown that the sharemarket corrects once every 357 days — or about one a year, on average. So even though the doomsayers hark on about 2018 being a year of a ‘correction’ — it’s nothing new. It’s definitely nothing to be afraid of. Over the long run, Aussie and international shares have proven again and again to be the best place to invest.
- Volatility will be the price of admission. Interest rates are rising. Make no mistake. And when interest rates rise, share prices will likely become more volatile. That means more bumps on the way up. No-one can predict short-term prices, but if you think you won’t be able to stomach the bumps and stay the course, consider investing with a professional (e.g. in an ETF, index fund or active manager).
- Prepare yourself. Falling property prices, a potential change of government and rising interest rates seem to paint a pretty scary picture of 2019 and beyond. While the chances of something bad happening are slim, it’s always smart to expect the best but be ready for the worst. I’ve found that the best ways to plan for and take advantage of market crashes is to pay off high-interest debts, keep 6 months of cash as an emergency buffer, invest in yourself to get a promotion or upskill, and have adequate insurance.
1 Free Kick in 2019
There is one more important point I think all investors need to consider for 2019 and beyond and it’s this: avoid companies with excessive debt.
For example, I’m steering clear of companies like Transurban Group (ASX: TCL), Sydney Airport Holdings Ltd (ASX: SYD) and the banks because they seem to have stretched their balance sheets.
Sure, not all debt is created equal. But when you’re investing for the long run and interest rates are on the way up, I think it makes sense to avoid companies with bloated balance sheets and get exposure to great companies that don’t need it.
Indeed, there are some ASX shares that offer blistering growth without the need to load up on debt…
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