It can be hard to stay on top of trends in the always-changing stock market. Choosing where to invest your money wisely, year after year is a challenge that can have big risks and also big rewards.
Doing your research and, if you’re able to, tapping someone in the know for information is a logical first step before you dive in or change up your current holdings. Of course, there are always online trading platforms like eToro, that allow you to dabble in multiple companies to invest a little — or to invest a lot.
With a new year upon us, there are also a lot of opportunities to make some money. To find out exactly where you should be funnelling yours, plus how to spot a promising investment (or notice red flags, early) we spoke to Davide Marcotti, a popular investor at eToro, to find out where he’ll be spending his money in 2021.
What are the main indicators of a promising investment?
Marcotti explained there are three main things to look out for when deciding whether to make an investment.
1. A consensus amongst successful and experienced investors: “Whenever I consider a stock pick, I do extensive research on various channels to see what other successful investors think about this particular asset. My motto is that you need to be humble when investing and understand your limitations. There are much better people that are specialised in certain spaces which you should really consider listening to.”
2. Disruptive technology: “A promising investment is in something that has massive upside potential. In order to achieve that, the stock or asset in question needs to involve a disrupting technology. For example, Bitcoin with the blockchain to make third parties obsolete.”
3. Undervalued or misunderstood: “The best investments are in assets that are undervalued and therefore misunderstood. Going back to the Bitcoin example, very few people realised that its main purpose is to be a store of value (digital gold) and is not meant to replace FIAT currencies. Because of its limitations (it’s able to only process ~5 transactions per second as opposed to the ~1700 supported by the visa scheme), most investors mislabelled it as a currency with no future.”
What are red flags people should look out for before investing?
When we posed the question to Marcotti of what red flags people should always be on the lookout for when investing, his answers were quite obvious. In fact, he says that human error is a big factor in people making mistakes when investing.
“FOMO (fear of missing out) is probably the main cause of losses,” Marcotti said. “I was a victim of it myself quite recently after having been in the investing space for 12 years. Also, you need to be very careful approaching an asset that has risen quite substantially in the last trading days or weeks. You might be too late to the party as other investors have understood its value before you did.”
What are the top investments people might want to consider this year?
Marcotti was rightly hesitant to give specific financial advice, so instead, he let us in on what he’ll be investing in throughout 2021:
- Biogenetics: I believe this industry is undervalued, characterised by a disrupting technology and is largely misunderstood.
- Electric vehicles: I believe Tesla and other competitors have just begun their journey.
- Crypto assets: Although the whole asset class has been registering huge gains in the past weeks, I humbly believe there’s more upside potential as this is still widely misunderstood. PayPal could be a good and less risky play if you want to gain exposure to the crypto space without investing in coins or miners.
- Emerging markets: I am looking at India and other countries that have recently gone off the radar in favour of the Nasdaq tech giants. I think this could be a very rewarding play if we are patient enough to be holding for years.
- Ecommerce: I am personally very bullish on easily scalable platforms such as Amazon, Fiverr, Upwork, Etsy, Shopify, and the likes.