Magical Penny

If money makes the world go ‘round, then investment is the fuel which powers it.

Nowadays, there are an incredible amount of investment opportunities available to the average investor, and almost anyone can get involved at some level (even pension schemes are an investment).

To those who are inexperienced with markets and market behaviours, the world of investment can certainly seem daunting, especially with so many so-called ‘experts’ touting their market prophecies on a regular basis. As such, here are some of the ways that novices should approach investment.

Caution

There are no two ways about it; investment is a risky game at the best of times. Despite many people claiming to know golden, fail-proof investment strategies (which they will often only share for money), no one ever truly knows how a certain market will behave, and volatile markets in particular tend to be very risky to invest in (whilst providing higher potential reward).

As such, all investors starting out should make sure that they are cautious, and do their own research before ploughing money into their desired market. This caution could well save them a fortune in the long run.

Portfolio Diversity

Another wise way to avoid the pitfall of taking on unnecessary investment risk is to create a diverse investment portfolio, filled with assets of varying types and risk levels. This means that an investor could, for instance, include a highly volatile asset, such as a share in a fledgling technology company, and a very safe one, such as gold.

You could also explore the idea of diversity within an investment category. Real estate is the perfect example of this. A lot of property investors will invest funds in multiple types of properties to spread their wealth and enjoy different income sources. You have some properties that you flip for profit right away, and others that generate steady revenue through renting them out. Having lots of properties also covers your tracks if one investment might fail. Your rental property is unoccupied and losing money, but you have others that pick up the slack.

No matter which way you approach it, having a diverse portfolio is likely to bring more joy and success in the long term compared to a very narrow, riskier portfolio.

Advice

Perhaps one of the most useful resources available to investors is financial advisers. These specialists make use of expert data analysts and advisors such as Hymans Robertson, to ensure they have all the up to date market information they need.

They can help inexperienced investors to choose the right investments for them, allowing them to experience much higher chances of success. They do, of course, cost money, so it is best to do some research and make an informed decision on the benefits of using one.

Investing is an exciting and often rewarding venture, so long as the risks are properly managed and only disposable money is used. Research is a must, but once experience with different markets has been gained, investors can enjoy a much greater chance of success in their pursuits.

For more investing articles check out the Investing articles here on Magical Penny

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Have you ever considered financial trading as a way of generating extra money?

Most people are put off taking part, as they feel the process is too risky and complicated. The internet has opened up the opportunity for beginners to try their hand at financial trading with many trading platforms to choose from. Financial trading involves actively participating in the financial markets. Traders seek to profit on the fluctuations in the markets whether they drop or rise.  

What is financial trading?

Financial trading is very similar to other forms of trading, except it is the buying and selling of financial assets. The financial assets can be in several forms including forex currency, company shares and bonds. It is also possible to trade in commodities such as gas, oil and gold. Many people start with financial trading by buying shares in a favourite company or brand, selling on at a profit and moving on to develop a portfolio of shares. Research and knowledge is essential to ensure the trading process runs as smoothly as possible. Beginners would be best placed reading an intro to forex in order to gain as much information as possible.

Practice lowers risk!

Trading on the financial market is not without considerable risk. It is extremely important to know what you are doing. The best way to do this is by practicing first. Most of the main trading platforms offer the opportunity to participate in the financial trading market with “monopoly” money. This allows the beginner trader to learn how the markets ebb and flow. This will enable you to hone your skills in preparation for using your own money.

It is important to see educating yourself as a long term goal, financial trading is certainly not a “get rich quick” option. The training process could potentially take months rather than days. Don’t feel rushed into getting started as this is when costly decisions can be made.

Startup costs are low

There is a great deal of competition within trading platforms, who all want your custom. Due to this many trading platforms allow you to open up an account with as little as £100. Leverages are also offered by brokers which will increase the spending power of your £100 investment. One such example is that if 200:1 leverage on your £100 investment your spending power will increase to £20,000.

Fluctuations do occur in the financial markets, so be aware that you will experience losses as well as gains. This is why practice is so essential as you will have lots of experience of how real markets work.

Research carefully before parting with your hard earned cash, there are many dubious schemes on the market all seeking ways of getting your money. Look at reviews and seek guidance from professionals regarding any investments you make.

In conclusion trading on the financial market can be very lucrative if you are in the “know” and take time to carefully research platforms and brokers. Keep your wits about you and if the deal sounds too good to be true, it probably is a scam!

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Managing your personal finance in a way such that you can save and invest money is difficult, but the radical evolution in fintech is making it easier.

Various wealth building avenues, that were earlier off-limits for smaller retail investors because of their capital-intensive nature and complex working, are now within reach. It’s imperative that you consider leveraging these wealth creation avenues to make money and whilst being aware of the risks.

Think of technology as being potentially a great enabler that can help you build your wealth.

So, let’s take a look at ways you can make money:

1. Forex Trading

Forex or FX trading is currency trading and it has been around for a long time. However, the lack of transparency and the sheer complexity of FX trading kept small retail investors away. But, the implementation of blockchain technology in FX is changing all that. It is making FX trading more cost-efficient, decreasing complexity and reducing risks for investors like you by adding an extra layer of transparency to the proceedings. Trading platforms such as Lykke, Serenity and many others are making it simpler for smaller investors to use FX as a viable wealth creation alternative.

2. Cryptocurrency

It’s anybody’s guess whether crypto currency like Bitcoin will replace traditional currency any time soon.  But what is not in doubt is that you can make money by buying and selling cryptocurrency. Here again, it’s technology like blockchain that is mainstreaming cryptocurrency trading amongst retail investors. Most cryptocurrencies are based on blockchain based technologies, but the advantage you now have is there is a move from legacy blockchain models to more advanced technologies that inspire more trust, increase security and drive hassle free trading. Yes, trading in cryptocurrencies is risky, but the huge fluctuations in the market, make it rewarding at the same time. Trading exchanges such as Huobi, Binance, etc. are making crypto currency trading more accessible to small traders. It’s time that you use this accessibility to diversify your personal finance portfolio. The key here is invest but, not to risk too much.

3. New Fangled Share Trading

Share trading has been around for ages, and trading in shares can be a good way to grow your personal wealth. However, the question is – are you still using the traditional approaches to share trading or moved on to new, cost efficient and less risky share trading practices. The idea is to use technology to maximize your profits. Take the case of social trading, which is an example of third platform technologies acting as new age drivers of wealth creation. As a small investor, you can join a social trading platform to follow expert traders and copy their trades. You can also get key market insights and interact with these experts to make better trading decisions. Social trading platforms like eToro, help you reduce trading risks and make trading a more easy, seamless and profitable process. There are other platforms such as Revolut that are launching a commission-free trading service. Using such platforms can reduce your trading costs and thus decrease your risks.

Tech Empowered Personal Finance

Wealth creation is risky business, but tech is making it easier to take some calculated risks especially for small investors who want to slowly build their personal wealth. If you are managing your personal finance well and want to make it work for you, using these three avenues will help you on your way to success.

Good luck!

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These are strange times politically speaking, from the election of Trump to the UK leaving the European Union, it seems that 2016 and 2017 were impossible to predict. Regardless, the financial markets will have to continue as usual. Here are some of the key trends in investing in 2018.

Whatever your opinion on bitcoin and other cryptocurrencies, 2017 was undoubtedly the year where everyone became an expert on the topic, sort of. All things point to 2018 being the year when bitcoin will be accepted as part of the financial landscape, or tank entirely and vanish from collective memory. 2018 has also given us futures trading in bitcoin, to add to the complexity, with early signs pointing to futures expiring wreaking havoc on bitcoin value. Short positions on expiring futures are making a tidy profit.

As bitcoin hogs, the headlines, don’t forget that technology is disrupting the financial industry. Fintech is changing how we invest, borrow, and save. In 2017 over $27.4 billion has been spent in the fintech industry and 2018 promises nothing less. Some of the hottest fintech companies come from China, with the likes of Ant Financial, ZhongAn, Lufax and Qudian to look out for. If it wasn’t clear already in 2017, this year would underline that the financial sector has been changed forever. Financial organizations who think they can do business in the same way they did five years ago, will be woefully behind three years from now. For investors, however, it is not as clear-cut as to where to invest. As with any fledgling industry, you will have meteoric risers, but also catastrophic implosions. The smart money will be on those fintech companies that reach maturity and start offering less propriety, more stackable solution.

AI is Here

Still, on the topic of future tech, artificial intelligence (AI) will continue to dominate the conversation on the future of investment as it did in 2017. The common theme last year as it will be this year is about control. AI evangelist will tell you to trust the machine entirely, and traditionalists will argue that a computer can not replace a human brain, at least not yet. It seems clear that we are fine to trust AI when driving a car, although still a bit uncomforting, but not at all to handle our money. We are moving to a compromise where we trust AI to take care of day-to-day routine transactions, where there can be benefits in lower charges, and let us humans take care of the bigger stuff, such as real-life interactions and anticipation and defining portfolio mixes. What we are comfortable with now is automated trading software where we can determine and test strategies before setting them live in the real world.

BRIC Is Back

Speaking of the real world, the so-called BRIC countries (Brazil, Russia, India, and China) are back. Jim O’Neill, the former chairperson of Goldman Sachs Asset Management, predicted in 2001 that these would be the fastest growing emerging markets for the decade. Now that prediction only partially came to fruition, and in 2015 Goldman Sachs closed its BRIC centric fund after years of losses. However, just a few years after that fact. The IMF has revised its growth forecast for these countries to 4.9pc for 2018, that is versus 4.6pc in 2017 and 4.3pc in 2016. The steady growth with the potential of favorable economic policies due to declining inflation makes the BRIC countries potentially hot property again. Adding companies with strong roots in these countries might be a wise move for anyone’s investment portfolios.

Changes in portfolios might follow the rise of some alternative assets. PWC expects for 2018 that portfolios will shift to commodities, private equity, property, and infrastructure. Commodity equity valuations seem relatively cheap relative to underlying prices. In 2017 $621 billion was raised for private equity, breaking the previous record set in 2008 at $557 billion. Real estate outlook for 2018 is good for both the office and retail markets, with lack of inventory being the primary driver. Globally countries continue to invest in infrastructure, and we expect that trend to continue. PWC estimates that these assets will make grow from $10.1 trillion worldwide under fund management in 2016, rising to $13.9 trillion by 2020. If hedging your portfolio is one of your goals in 2018, considering alternative assets might be the right way to go.

Whatever you invest in, realize that investing is at risk. You may get back less money than you initially invested. Past performance is no guarantee for future performance and never invest more than you can afford.

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While derivative assets such as currency may have experienced a huge surge in popularity in the digital age (an estimated $220 billion is traded each hour on the forex market), this does not mean that more traditional assets are now longer relevant.

In fact, classic asset classes such as stocks have also benefited from technological advancement, with CFD (contracts for difference) trading enabling investors to access the equity market and profit even in a depreciating climate.

CFDs can also be applied across a host of alternative markets, and there’s no doubt that they offer huge value in the current climate. In this post, we’ll explore this trading vehicle in further detail while asking the core difference between CFDs and investing in stocks.

CFD vs. Stock Trading – The Key Difference

In simple terms, trading stocks through traditional methods requires you to assume ownership of the underlying asset. This means that you’re ultimately tied to the performance of a specific stock or share price, making it extremely difficult to profit in a depreciating market.

CFD trading through brokers such as GKFX is different, however, in so much that they allow you to access the stock market without forcing you to own underlying stocks or equity. As a result, they enable you to speculate and hedge against specific stocks, creating an opportunity to profit even as values decline.

Through this type of arrangement, you’re investing in a contract between yourself and the CFD provider, rather than an underlying financial instrument or the stock itself. This is a seemingly small but significant difference, and one that is particularly important in a volatile marketplace or economic climate.

Are There Any Other Advantages of CFD Trading?

Additionally, it also fair to surmise that CFD trading can afford you far greater exposure in the market and help you to create a more diverse portfolio. You could leverage CFDs to invest in indices rather than single stocks, for example, offering you access to growth markets on a large scale.

Similarly, CFDs are traded on margin, which in turn means that there’s no requirement to invest the full market value of a stock or asset class upfront. Instead, you can trade on marginal deposits without compromising on your market exposure, which is a huge boon in any setting.

Most importantly, this will allow you to open larger positions than your capital would otherwise allow, which will increase your potential returns in the case of successful trades.

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