In a modern financial world, there’s a huge variety of investment possibilities. They range from the most obvious, as stocks and bonds, to the ones you do not immediately think about: art, antiquities, wines and even ancient castles. And the biggest thing the modern world came up with is cryptocurrency.
It is worth being mindful that different investment forms carry various degrees of risk. While some of them can be almost completely risk-free, like US government bonds, other ones are highly venturous, like hedge funds and crypto investing. That all comes down to a point where you have to decide whether you’d accept some risk for increased returns – and if yes, how much.
When finance first entered into a new decentralized phase, that signified the start of DeFi. Satoshi Nakamoto, a father of Bitcoin and technology behind it, was the first one to bring cryptocurrency into public attention in now-distant 2008.
Ever since, it has been steadily evolving and fastly growing, so that now the whole thing even reached the point when first cryptocurrency funds came into existence. Decentralized currency is still viewed more as an investment rather than a means of exchange – and that’s exactly what makes a strong rivalry to other traditional forms of investment.
How will the future of DeFi unfold, remains to be seen. Until then, let’s look more closely into what the financial market has to offer right now.
Stocks
If you are completely new to investment but always wanted to try, it is worth starting with proven and reliable blue-chip companies. Especially in 2020 (and possibly beyond), these have a promise of bigger growth and increased returns.
That is why for your first investment you can pick up a FAAMNG company: either Facebook, Apple, Amazon, Microsoft, Netflix or Google (Alphabet Inc.). To say even more, the club of the richest companies in the world recently welcomed another new member who reached one billion in market capitalization – Google. Even though the market cap is not a sole metric to define successful investment, GAMA stocks are still worth paying note to.
Once you gain some experience with public companies, you may consider going for something less buzzed about. Penny stocks are listed on pink sheets – alternatives to traditional stock exchanges that focus only on stocks traded over-the-counter.
That makes them popular only to a limited number of people, usually less than the general public. And there’s a reason behind that – penny stocks are not usually as verified as stocks on a public exchange, which nevertheless does not prevent them from offering good returns. That is why in the case with penny stocks investors may suffice putting only one dollar from their pocket, and that completely stands for its name.
Bonds
Once you get your hand in stocks, you may consider bonds as your next item on the list. While stocks are more dependent on the shape of the economy and may fluctuate largely, especially in the time of crisis, bonds are less susceptible to these external factors.
In general, bonds are considered to be safer, although at the expense of higher returns. However, there is one thing that makes bonds highly reliant on – interest rates. As a rule of thumb, the price of a bond goes in opposite with interest rates – the higher the former is, the lower the price of the bond is.
There is also a difference in the market structure. In comparison to stock, the bond market is more difficult to get involved in. This is because there’s no particular market place for bonds (as opposed to the stock market), therefore all of the transactions are over-the-counter. The solution for it is pretty straightforward – if you want to invest in bonds, you should invest in funds that will do the rest for you.
There are a variety of bonds on the market. Those may be different on the base of price, time span (maturity), and of course, the level of risk involved. Depending on it, the agencies like Moody’s and Fitch are assigning bonds with a rating: from AAA to BBB, the level of risk is minimal to medium, while everything that goes beyond is considered risky.
In general, government bonds are considered the most stable, although with very small (or no) actual returns. Besides, these various types of bonds are based on different conditions: some of them, like, can be withdrawn by the company, while others like can be terminated before maturity date by the investor personally. If you are curious to find out more about bonds, please check here.
Funds and Indexes
Not having enough experience in the field of investment, this may happen that you would rather entrust someone else to do the investment choice for you. Or perhaps you just don’t want to spend too much time and effort on it on your own? Then an investment fund may be an excellent option. These funds are as various as investment instruments they are offering – from the index and hedge funds, there’s something for everybody.
Sometimes, certain investment instruments are not traded openly on the market. A perfect example of this is index which is, from the definition, it is a bundle of largest stocks in a particular industry (sector, or economy), – and therefore does not exist as a separate unit. Another example is bonds that are only purchasable through funds. Therefore, funds play an important function in leveraging hardly accessible, and sometimes even risky, financial instruments.
There are various types of funds depending on its purpose. Some of them, like index funds, aim at stability or rather, are targeting the same performance as a particular market index (be it S&P 500, Dow Jones Industrial Average or any other). Other ones, like mutual funds, are aiming to reach higher returns through a diversified portfolio.
Unlike hedge funds, that may be doing some risky investments with the purpose of higher returns (like offshore investing, for example), mutual funds are still oriented towards security and lower risk. However, those options are only accessible through the individual agent – if you want to invest in funds without raising from the sofa, check ETFs.
Overall, funds may be an attractive option, however, it is always worth being aware of commission fees (which sometimes reach up to ) and the level of risk associated, especially if the part of the portfolio is companies registered in the tax haven.
Alternative Investments
If traditional investment forms no longer spark your interest and you would like to try something out-of-the-box, then alternative investments will certainly make you excited. Commodities, luxury, arts, antiquities, property, vintage cars and wines – these are the things which make up the portfolio of modern elite and richest people in the world. The lovely thing about those is that they tend to become steadily more expensive over time – for example, that was priced ten years ago is worth nowadays.
To give you a fresh perspective on this, the cost of Louvre museum is $10.5 billion – this is half of GDP of Iceland. Besides, with the time antiquities, jewelry and works of art only appreciate in price. In 2020, the global art market was valued for 67.4 billion, which is 3 billion higher than one year ago. Despite speculations that the art market is a bubble, it only continues to increase in value. According to Art Basel Report, it is roughly estimated that the whole art market by 2025 may reach as close as $100 billion. May it be the right time to invest?
Besides that, the property market is on the rise too. The prices of premium housing in the “city of lights”, Paris, are predicted to go up by the whole 7%, while Berlin should see an increase of 5% in 2020. Miami, Sydney, Geneva and Singapore are the next cities appreciating most this year.
London should not be overlooked as well – for the first time 1.5 years, the city is seeing growth in property prices, which is linked to a positive reaction to post-election and Brexit. However, it’s worth not to be overly optimistic about that at this point, since the most crucial event for Britain – Brexit – is yet to be legally carried out.
What is less dependent on geopolitical climate, however, is gold. That is one of the reasons why high-net-worth individuals hold a part of their possessions in this precious metal. There are various ways to invest in gold – these vary from gold bullions, which is gold in actual physical form, to gold funds. Find out more here.
In general, although alternative investments are an excellent idea for a long-term investment, those are commonly characterized by a lack of liquidity. So, if you make up your mind with putting money into some expensive work of art, do not it to be transformed into cash immediately.
Forex Trading and Cryptocurrency
The most novel out of all investment forms (it actually appeared only 10 years ago), cryptocurrency quickly seized over the market of fresh enthusiasts. Nowadays, the bold ones who bought bitcoin back then have their value multiplied by 700 times. Doesn’t sound bad, eh?
However, since then there were a lot of notorious cases when investors got their money vanished all in one day – those are well-known cases of Mt Gox and numerous Ponzi schemes, the incidents that are actually repeated up to this day. Nevertheless, there is a way to secure yourself even with such a risky investment as cryptocurrency – for example, choose a hard wallet. More about it read here.
There are many tokens in the modern environment which are continued to be released on a common basis. It is not uncommon that companies even decide to launch their own coins through ICO process – take for example XRP, BNB, and GRAM. More recently, even Facebook decided to make its footprint in cryptocurrency space. However, more traditional tokens like BTC, ETH, and XMR do not have any single party behind them and are based on a promise of complete and full decentralization – although some implicit manipulations may still occur (check this guide).
Cryptocurrency investment and forex trading share many similarities. Both are centered around currency (fiat or digital), and besides many forex trading strategies may actually apply to the trade of digital tokens. No doubt, however, that crypto market is still at its early stage and exposed to risk substantially more. But that may be exactly the reason why so many risk-loving investors are engaging in margin trades and making arbitrage, especially as the cryptocurrency market becomes more developed and new financial instruments are coming out.
If you believe that the future lies in crypto, then we advise you to scrutinize cryptocurrency, its types and all weak points in our section: crypto guides.
Conclusion
The modern financial world is abundant with numerous possibilities for investment. With more traditional forms of investment going to the second plan, the whole focus is now around cryptocurrency and its possibility to transform the future of finance. Sensing this opportunity, many companies rush to make a footstep into this new developing and relatively unexplored environment.
With cryptocurrency ETFs coming into reality, it is quite possible that in the future some major investment firms will be centering around digital currency and its investment potential. Can traditional investment instruments, especially the ones created by banks, be obliterated? This is the main question to be answered, but one thing is known for sure: the era of FinTech disruption is coming.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
