It’s always difficult to start something new, so investing without a strategy can be inefficient. An investment strategy is a plan for buying and selling securities depending on the goals, time, and personal characteristics of the investor.
Often, without a strategy, investments turn into gambling and investors experience enormous stress when portfolio drawdowns.
Investment styles depend on the nature and characteristics of the person and can change with age.
Young investors have time to recover lost capital, so they can invest in riskier assets. Older investors are more focused on capital preservation and stable income and prefer not to take risks.
ETF Markets
The abbreviation ETF stands for Exchange-traded fund. An ETF is a public investment fund that lists universal shares for sale on the stock exchange, consisting of shares of different companies.
Units of ETFs are traded on the stock exchange like ordinary shares. Their quotes change continuously throughout the day. This means that you can buy and sell them at a fair market price at any time through your broker.
ETFs can rise and fall in price following the fund’s assets: company stocks, bonds, or commodities.
The average annual return is an average indicator. For example, if the asset N has risen in price by 10% in one year, by 7% in the next, and by the end of the third year it has fallen in price by 0.5%, its return on average will be 5.4% per annum.
The use of ETF funds within an investor’s portfolio forms a balanced investment strategy with a good balance between profitability and possible risks.
Investing in cryptocurrencies and blockchain companies
If in 2009, when Bitcoin appeared, only a few people knew about the cryptocurrency, today anyone can buy, sell and earn virtual money. And there are thousands of different cryptocurrencies besides Bitcoin.
Along with the interest in cryptocurrencies, the interest in blockchain has also increased. Blockchain is already being used for storing and processing personal data and identification, in marketing and computer games.
Blockchain is a distributed database that contains information about all transactions carried out by system participants. All information is stored in it in the form of blocks that create a chain.
All of them are connected by a hash – an algorithm that turns any information into a stuffing that cannot be deciphered. It is needed to protect these blocks and preserve the structure of the database.
It is called distributed because information about the entire chain of blocks is distributed and stored by all network participants. That is, if someone fails, the database will not be lost.
There are two types of blockchain – closed (permissioned) and open (permissionless).
In a closed blockchain, a limited number of people have access to the system, and only they can configure the system. There is no need for a built-in currency here. At the same time, a wide audience has access to transactions, but only in view mode.
This type of blockchain is used, for example, in wholesale banking.
In an open blockchain, all people have access to the database. They can view, change and add new blocks. Usually in this type of blockchain, there is an embedded currency and there is a crypto-economy.
Users believe they can use a safe currency and protect their anonymity. Miners process transactions, generate new blocks, and earn commissions on this. And there are investors who can speculate or just hold a certain cryptocurrency for a long time.
Short-term speculation in Forex, Stocks, and Commodities
The stock market is where investors put their money to work.
As a rule, novice investors come here partly due to the desire to invest in companies they are known about. That’s because they don’t want to wait decades for their investment to pay off.
Many of them, especially millennials, expect faster returns from short-term investments.
What is a short-term investment?
It seems obvious that short-term investment is investing in stocks or other assets for the short term, but things are somewhat more complicated. It is impossible to determine exactly what period of time is called “short-term”.
Professional stock traders calculate the short-term investment in hours and even minutes.
Differences in interpretation are due to the fact that investors select different strategies for the assets they manage.
Traders usually aim to lock in small profits in a short period. They can buy several shares at the time of the opening of the exchange and close all positions before lunch.
Day traders make quick trades within a single trading day, closing all trades before the market closes.
Therefore, let’s agree that short-term investments are made to generate income that will be enough to support a family or buy a private house in the next 5-10 years.
Index Funds
An index fund is a type of collective investment, a stock or mutual investment fund, whose strategy is based on repeating market changes in a predetermined index.
Let’s say an index fund is trying to track the S&P 500. The fund manager will buy shares in a proportion that is exactly equivalent to 500 shares in the S&P 500. So each share of the fund is like a mini stock of the S&P 500.
If the S&P 500 rises 1%, the fund should rise by about the same amount.
Start investing early and be consistent
It seems to many that investing is difficult, requires special knowledge, and is not suitable for everyone. Everyone can learn how to invest, the main thing is the right attitude and motivation.
In order not to be disappointed in the stock market, you should understand the fact that investment is a long game. Entering the stock market and quickly starting earning will not work.
There is no easy formula to learning how to invest, so be prepared to spend time and money learning and trying different approaches.