How I'd invest in 2020 to make a million

Here's where I think there are opportunities to generate high returns in the next year.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Despite experiencing a bull market over the past decade, equities seem to be the most appealing place to invest at the present time. In many cases, they trade on low valuations that could make them more attractive than other mainstream assets.

Furthermore, there are a range of long-term growth areas that could deliver high returns for investors. Through purchasing companies with solid fundamentals and sound strategies, it may be possible to generate high returns in 2020 to increase your chances of making a million.

Stock market appeal

After a bull run that has lasted for over ten years, it is somewhat surprising that the stock market continues to offer a more favourable return profile than other assets. Low interest rates mean that yields on investment-grade bonds and cash returns are relatively unattractive, and may offer a modest real-terms return. Furthermore, the rise in property prices since the financial crisis means that their scope to generate additional returns may be somewhat limited.

Therefore, focusing your capital on shares could be a shrewd move. It may enable you to capitalise on the forecast improvement in global GDP growth in 2020, while accessing companies that continue to offer wide margins of safety.

Long-term growth trends

Within the stock market, defensive shares that can produce sustainable growth could be appealing. Risks facing the world economy, such as a trade war and geopolitical uncertainties, may mean that investors place greater importance on the reliability of growth provided by businesses. This could make cyclicals less in-demand among investors, while stocks operating in sectors such as consumer goods and tobacco become more popular.

Additionally, growth trends such as healthcare could continue to be popular among investors in 2020. The world's population growth and its increasing average age are challenges that are unlikely to abate in 2020. Therefore, opportunities to capitalise on it through purchasing healthcare companies, for example, may be worth taking in 2020.

Fundamental strength

As ever, investing in stocks that have solid balance sheets and strong cash flow is likely to be important in 2020. Although interest rates could stay at low levels in the next 12 months, the potential for them to rise over the coming years may mean that companies with sound fundamentals become increasingly popular among investors.

Therefore, undertaking the research required to establish whether a company has a solid outlook could be worthwhile. This may involve checking its annual report to ascertain the strength of its finances, as well as considering its growth strategy. This may be especially worthwhile given the risks that could be ahead for the world economy.

Outlook

The 2020 calendar year could include further uncertainty for investors following a volatile 2019. However, the risk/reward opportunities available in the stock market could make shares the best chance to generate high returns in 2020. They may improve your prospects of making a million in the long run.

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. 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 Scott Phillips.

More on Investing Strategies

A mature-aged couple high-five each other as they celebrate a financial win and early retirement
Dividend Investing

5 top ASX dividend shares to buy right now

Analysts think income investors should be loading up on these shares.

Read more »

Two adults and a child look happy as they walk through airport with child sitting on suitcase.
Dividend Investing

Will Qantas shares pay a dividend in 2024?

Will the dividends return this year? Let's find out.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Dividend Investing

2 market-leading ASX dividend stocks to buy in April

Analysts have put buy ratings on these market-leaders.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »

Man holding Australian dollar notes, symbolising dividends.
ETFs

Want the latest dividend from the Vanguard Australia Shares ETF (VAS)? Here's what you have to do

If you want to bag the latest VAS dividend, here's what you need to do.

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Dividend Investing

Investing for passive income? Keep any eye out for that boosted Telstra dividend today!

If you own Telstra shares, keep an eye out for that juicy dividend payout today.

Read more »

Couple at an airport waiting for their flight.
Cheap Shares

Is Qantas a bargain ASX 200 stock today?

Analysts at Goldman Sachs think the Flying Kangaroo could be dirt cheap.

Read more »

Person holding a blue chip.
Blue Chip Shares

2 ASX blue-chip shares I'd buy with $3,000 right now

These are large businesses with compelling futures.

Read more »