How I’d invest £20k in 2020

A new year always brings bright new opportunities, and 2020 will be no different. At the very least, its an opportunity to look at how well any existing investments have performed, and decide where to put your money next.

Stock markets win!

The past 12 months have been good for stock markets. In fact, the entire decade has been hugely rewarding, as we avoided a recession for its entirety, and thats highly unusual. Central bankers simply couldnt let it happen after the havoc wreaked by the financial crisis, and used low interest rates and monetary easing to keep markets buoyant.

Its been a great time to be an investor andI expect that to continue in 2020, although with more volatility on the way.

Many people dont trust this bull run, the longest in history, and I understand that. However, anybody who shunned it on high-minded grounds will be notably poorer as a result. The stock market remains the best way to build your long-term wealth, and I would choose it over rival asset classes such as a Cash ISA, buy-to-let, Bitcoin and gold. So where to invest now?

Take your opportunities

The answer partly depends on you. Many people find themselves with a ragbag of different stocks and funds, often weighted to just one or two companies, sectors or countries. For example, the US market has been one of the worlds top performers so theres a fair chance many of us will have too much exposure to that. You need to strike a balance, between the US, UK, Europe and emerging markets, with some cash and bonds to balance your risk.

Shares should formed the bulk of your long-term savings, because with an average historical long-term return of around 7% a year, they outpace almost every rival in the longer run. They may be volatile in the short term, but if investing for retirement over 20 or 30 years, they should really beat allcomers.

Make money and pay no tax

If you havent invested before, perhaps the first place to start is your annual tax-free Stocks and Shares ISA allowance. You can set one up quickly and cheaply with an online wealth platform, and all your investment returns will be free of income tax and capital growth. This can make a massive difference to your overall return.

This financial year you can invest anything up to a maximum 20,000. You could keep things simple by sticking your money in a low-cost exchange traded fund tracking the FTSE 100, such as the iShares Core FTSE 100 ETF, possibly balanced with a global fund such as the Vanguard FTSE All-World ETF. In time, you should spread that with two other indices, such as the FTSE 250, S&P 500, and European and emerging markets.

You can then start looking at for individual share opportunities. There are plenty of attractive opportunities out there personally, Id consider popping thesefive stocks into a starter portfolio of FTSE 100 companies.

The important thing then is to stick at it. Keep investing every month, ignore short-term stock market volatility (except as a buying opportunity), and let the dividends and growth roll up throughout 2020 and beyond.Thats my tip for a happy New Year!