The current coronavirus pandemic has made a lot of people realise just how financially vulnerable they are. What we all need are some real ideas for investments. If each of us could just find at least one investment that works well for us so that financially we are not so shaky.
At times like this, people begin to understand just why it is so important to have multiple income streams and to have plans and reserves set up for the future. Investments are one of the things that may be worth looking into. Of course, nothing is ever guaranteed – poor decisions and investments can end up losing you money – but plenty of research, lots of good advice and not being adverse to taking the occasional risk means that you are more likely to reap a few rewards in the future.
Let’s take a look at some of the things that you could invest some money in, and the pros and cons of each one of them.
Cryptocurrency etc are great ideas for investments
Cryptocurrency is the new big thing in the world of investments. It is a form of digital currency. You have more than likely heard of the most popular one, Bitcoin. So far, it seems to be a pretty good investment, with people who have dipped their feet into this whole new currency seeing massive returns on their money. However, err on the side of caution. It is a relatively new thing, only being around for ten years or so, and we still do not know enough about it long-term to say whether it is always going to be worth it. Do your research carefully.
- So far, it has shown a lot of promise: In July 2015, the price of Bitcoin was just over $280. In December 2017, it was $17k
- It gives you improved liquidity: It is very easy to convert cryptocurrency into cash, so if you need to get your hands on your money quickly, it is ideal.
- It is still very new: As mentioned above, it is still very new so it is hard to make any long term projections about how well this investment will do
- It can be very volatile: Fluctuation of values for cryptocurrencies is a major problem. That could be because it’s all fairly new and people tend to fear such intangible assets.
Property and land is another avenue to explore when it comes to investing your cash, and is one of the oldest. There are multiple ways you can do it, from buying and selling property, flipping, or renting out properties.
- The property market is generally (not always!) stable: Property has proven to be a very stable investment relative to some other markets. Sure, it has its ups and downs but the property industry appears to be much less volatile than other assets like the stock market. This may be due to the fact that it takes more time to sell land (and shares can be sold in a second) and the fact that property is almost always in demand.
- You can leverage your investment: Being in a position to leverage your investment means you can buy more with less. This happens with the property when you place a deposit on the property and the bank lends you the rest.
- It has the potential to generate positive cash flow for you
- It is not very liquid: You can sell shares at a moment’s notice, it takes longer to sell a property. It may take weeks or even months, depending on the location, to sell your house. The lack of liquidity can be a drawback if you need to quickly access your money for use in other areas of your life
- It usually has high entry costs: Shares you can buy into for as little as £500. Silver you can invest in for as little as £20. Property is going to cost you thousands and thousands of pounds just to get into the market.
- There is a tendency to put all your eggs in one basket: It is normal for investors to have all of their eggs in one basket because of the high entry fee. This lack of diversity opens you up to fail if the economy unexpectedly changes or your investment doesn’t go the way you’d planned.
Forex, or the foreign exchange market, is the largest financial market in the world. More than $5 trillion a day passes through the system. Essentially, it is trading foreign currencies on a decentralized marketplace and is what determines foreign exchange rates, so it is big business.
- It is very accessible: For individual traders, the forex market is one of the most accessible markets. Traders can set up a forex account within 1-3 days, and start trading with as little as £50. Trading can be done online via most brokerages and traders have access to real-time market pricing, data, price charts, tools and strategies through the online trading platform
- There is a potential for fast returns: The forex market moves fast and has strong liquidity. Combined with the typically higher leverage available to forex traders, these attributes mean that there could be potential for faster returns on the forex market than on some other markets where traders will have to wait for longer-term asset value growth and returns from traded assets.
- There is less potential for insider manipulation: Stock, bond, and even commodity markets may also be highly affected by private information possessed by those assets’ insiders and key stakeholders. However, the currency market is much less centralised and less affected by insider knowledge.
- There are fewer fees and commissions: Trading in equities, bonds, mutual funds, and other things is sometimes subject to high commissions, and often concealed fees, which may make trading more expensive than expected.
- It is volatile: Like every market, the Forex market can be volatile at times, especially if you are hankering after a short-term profit.
- Less regulatory protection: Forex trades are not carried out on a centralised exchange, so regulatory oversight is not always brilliant. First, you need to pick a broker and then do a due diligence check into their reputation and trading practice before committing to anything. You may not be entitled to any recourse if something doesn’t quite go right either, depending on the country that you are in
- Smaller traders can be at a disadvantage: Every day, more than $5 trillion is traded on the Forex market, mostly by the usual big player – banks, hedge funds, and other major financial institutions. Because of this, they generally have more influence over the price movements.
If, like us, you are scaredy-cat investors, start off small. Get some good advice from people who already invest. Try to learn as you go and have fun in the process too.
Do let us know about your ideas for investments too. Use the comment section below.
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