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Remember 2020? It was a wild ride with a mix of market volatility and good returns in some sectors. What will the new year hold for investors? From cryptocurrency heating up to more ETF options, we've got 2021 investing predictions you have to read and heed.

If we earned any lesson in 2020, it’s that no one can predict what will happen in the year ahead. Life, and the markets, always have unexpected ups and downs in store. Nevertheless, last year has provided some clues as to what to expect from the stock market and investors in the new year.

What to Expect From the Financial Markets in 2021

We don’t expect things to return to “normal” in 2021, but that doesn’t mean it’s bad news for investors. In fact, we can look forward to lower fees and even more investment opportunities than ever before. Here are our investing predictions for 2021.

More Options for Cryptocurrency Trading and Spending

A major Bitcoin rally began in late 2020. That upward trend is likely to continue well into 2021. Expect to see more cryptocurrency trading platforms make their debut, as well as more retailers accepting Bitcoin, and it’s possible we may see our first cryptocurrency ETF as investors push for more innovation in this space. To make investing easier for cryptocurrency enthusiasts, Wealthsimple recently rolled out Wealthsimple Crypto to allow trades in 14 cryptocurrencies (such as Bitcoin and Ethereum) on the platform. They may add more coins to the platform in the next 12 months.

Get $50 when you open your first Wealthsimple Crypto account!

Greater Focus on Socially Responsible Investing Options

Millennials are now the largest working population, and as they settle into adulthood, they’re looking for places to invest their earnings. Likewise, GenZ is entering the workforce and opening their first investment accounts. Both generations care deeply about the environment and are looking for more sustainable products and practices, and this is reflected in their investment choices. The demand for socially responsible portfolios will likely increase, so banks and FinTech brands will need to make sustainable investment options part of their product offerings to remain competitive.

If responsible investing is your bottom line, you can buy SRIs using an online brokerage like Questrade or Wealthsimple Trade. Both are excellent platforms, but Wealthsimple Trade is the only discount brokerage in Canada to offer commission-free trades.

Or you can pay a robo advisor to do this work instead. In building an SRI portfolio, Wealthsimple invests money across the entire stock market using low-fee ETFs that are carefully screened for environmental and social impact, while remaining as diversified as possible to maximize performance. Plus, Wealthsimple doesn’t outsource their research, so the overall fee is only about 0.23%.

Get $100 when you open your first Wealthsimple Invest account!

Continued Domination of Tech and Consumer Convenience Stocks

While it’s likely we will see some return to normalcy in 2021, the effects of COVID-19 will still dominate. The global pandemic forced millions of people to transition to working from home, increasing their reliance on technology as well as demands for food and product delivery. Technology, consumer goods, streaming services and fast food stocks shot up in response, making these are likely to remain leaders in market gains through 2021. While stocks experienced a short bear market in mid-2020, the bull market returned at the end of summer and will likely carry on throughout 2021. If you’re not yet investing in the stock market, now is the time to start.

Stock Market Volatility in the Wake of a New US President and COVID

Will the stock market will remain bullish throughout 2021, we’ll see significant volatility as Joe Biden takes office in January and rolls out any additional income support for businesses and Americans as the pandemic drags on. The US stock market is the largest in the world, and responsive to both consumer confidence and political bills. Expect to see major highs and lows as the US grapples with additional stimulus proposals and businesses trying to weather lockdown measures.

While many businesses struggled through the pandemic, others thrived and we can expect those that survived the global pandemic to succeed afterwards. As the COVID vaccine is rolled out across the USA and the world, expect to see increased investor confidence as we all get to return to some semblance of normal life.

More Big Banks to Offer Robo-Advisor Options

Both millennials and GenZ consider online banking the norm, expect that everything can be done within an app and trust AI (most of the time) to present them with the best choices. Robo-advisors have all but taken over, and Canada’s big banks are rushing to follow suit. Expect to see more traditional banks and brokerages roll-out automated investing options for clients. Marketing efforts will be focused on encouraging younger clients with little or no assets to sign up in the hopes of capturing lifetime customers who will stay loyal as their bank balances grow.

If you’re not yet using a robo-advisor to invest in the stock market, reconsider your decision. Even with the volatility in the investing year ahead, now is a great time to get started investing and a robo-advisor is your best option.

Reduction in Investment Account Minimum Requirements and Fees

Long gone are the days when brokerages demanded $10,000 account minimums and charged $30 per trade. In 2021, it will difficult for brokerages to hold their own if they have account minimums or charge anything at all. As robo-advisors and discount brokerages opened the market to younger clients with tighter budgets, we saw many account minimum requirements drop to $0 and commissions rapidly followed suit.

The big banks have had no choice but to copy competitors. Now we see even the most historical institutions offering no fees and no minimums with products. Know that you can begin investing this year even if you only have a small amount to start. You should also definitely take advantage of the numerous low-cost or no-fee promotional offers available.

ETFs Aiming to Eclipse Mutual Funds 

Over the past decade, the financial industry has transitioned away from high-priced mutual funds to low-cost ETFs to keep up with consumer demand. This year, we see mutual funds disappear entirely! At least, that’s what it looks like at first glance.

Mutual fund providers have started rebranding their offerings with lower-cost ETF portfolios, but make sure you read the fine print. Instead of mutual funds with common stocks, they are now offering mutual funds investing in ETFs. While these are technically “ETF portfolios,” they are still mutual funds and their fees prove it. Most charge significantly more in management fees than a robo-advisor. When exploring the investment options being pitched to you by a financial institution, make sure you get the details so you know exactly how your money is being invested.

What These Predictions Mean For Your Portfolio

Whether you’re an active stock trader or a hands-off investor relying on a robo-advisor, 2021 is going to be an exciting year for your portfolio. It’s a perfect opportunity to expand your investing horizons by adding cryptocurrency to your assets, switching to a discount brokerage to lower your fees, and checking out new ETFs on the market to further diversify your holdings. Whatever you choose, just make sure investing is a priority for 2021 and every year thereafter.

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