5 reasons 2016 is the best year yet to start investing

Credit: Lif

Ignore the turmoil, uncertainty, and ups and downs of 2015, the year ahead could be the best year yet to start investing for a wealthy future. Here are five reasons why:

1. Because interest rates are ridiculously low

If you’re struggling to remember when the Reserve Bank of Australia last raised interest rates, that’s because it was over five years ago, in November 2010, the same year Collingwood drew with St Kilda in the AFL Grand Final!

160106 RP - RBA OCR

Today, the official cash rate sits at an unprecedented 2%. If you own a home this likely means more cash to save or invest. It also allows companies to borrow more cheaply to invest in value-adding projects, driving investor returns.

And if you need your cash to produce income, investing in strong, dividend-paying companies like QBE Insurance Group Ltd (ASX: QBE) is an attractive alternative to the low returns offered on bank deposits.

2. Because oil is still getting crushed

At just US$37 a barrel oil is also looking ridiculously cheap by recent standards.

The average national petrol price has dropped 15% since July according to the Australia Institute of Petroleum, saving you money at the petrol pump and taking the sting out of your long summer road trip.

There is also a positive impact for many ASX listed companies. Airlines, miners and transport companies like Qube Holdings Ltd (ASX: QUB) benefit from lower operating costs. Meanwhile people who spend their extra road-trip cash will be a boost for companies selling discretionary goods and services like Crown Resorts Ltd (ASX: CWN) or Domino’s Pizza Enterprises Ltd. (ASX: DMP).

3. Because you probably have a job

With unemployment falling slightly to a seasonally adjusted 5.8% in November, from 5.9% the year prior, there is a good chance you’ve had to drag yourself back to work this week. Higher employment keeps the giant economic wheel greased, giving you money to invest and spend, helping locally based companies grow.

4. Because 2015 was terrible for the S&P/ASX 200

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) slumped 1.8% over 2015, but it’s not all bad for long-term investors.

One of the core beliefs of investing is that the stock market goes up over the long run. In fact, for the 10 years to December 2014, Australian equities returned on average 7.1% per year, after tax and including dividends.

Since the economy kept growing at around 2.5% in 2015, there is a good chance that better investing days lie ahead for equity investors.

5. Because there is no time like the present

The miracle of compounding means that there is no time like the present to start investing for the long term. The combination of more disposable income and growing companies means 2016 could be the best year yet to start investing.

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Motley Fool contributor Regan Pearson owns shares of QBE Insurance Group Ltd.. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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