Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
Starbucks
Recently, there’s been a surge in the selloffs of hyper-growth stocks which has deterred many investors from any hopes of positive returns this year.
Apart from energy, sectors including healthcare, technology and industrials have all performed worse than their previous quarters.
However, one stock that has escaped the trend is Starbucks. If we take the last earnings report, Starbucks beat on overall revenues, narrowly missing on the Earning Per Share metric owing to an increase in supply chain and labour costs.
Despite this, during a time when companies have spiked their prices in line with inflation and seen a drastic decline in customer demand, Starbucks have not.
Strong leadership from their CEO Howard Schultz, partnered with their decision to suspend the $20bn buyback programme, and instead investing more into their staff and stores, have all played a part in the stock’s success.
Looking ahead, the pace of unionisation amongst Starbucks employees needs attention, especially given that forty US Starbucks shops have already voted to unionise. Internal conflict between employees and management will be an issue, and if it results in poor publicity, it’s one that shareholders will feel the brunt of.
However, if negotiated efficiently, the company can enjoy the consumer shift from goods to services - a trend that will hopefully boost the bottom line and reassure investors.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
As war and corrections plague the market, stocks left invested could lose significantly. As a result, many investors are looking for ways to increase their investments’ security by placing their money in safe havens to hedge their bets against a market downturn. Discover these 6 safe havens to invest your funds in during market downturns this year.
1. A high-yield savings account
Maybe you like to play it safe when investing in safe havens. That’s good news since safe havens are low-risk places to stash your funds.
If you’re interested in a low-risk haven, consider placing your money in a high-yield account at Discover, Synchrony, Citi Bank, or Marcus by Goldman Sachs.
- These offer high-yield savings accounts at 50% APY and charge zero fees (some terms and conditions may apply).
According to the Federal Deposit Insurance Corporation (FDIC), your money is insured for up to “250,000 per depositor, per FDIC-insured bank, per ownership category.” This guarantee also applies to any initial funds that you deposit and any accrued interest.
The FDIC, which started in 1933 at the end of the Great Depression, was designed to stabilise the nation’s financial banking system.
Keep in mind that while safe havens have many pros, there are also some cons attached to investing in these areas.
The first con is inflation. Inflation rises at an average of 3.10% in the U.S. each year. Over the past year, inflation has soared in almost every area, from fuel to utilities, to grocery bills. The second con is slow growth.
If you place your cash in an account with no interest, your stash can only grow as you add to it. So, even though a high-yield savings account will give you maximum interest, it doesn’t have the potential to grow as fast or at as high rates as other (riskier) types of investments. At the same time, a high-yield, FDIC-insured savings account is one of the safest havens during a market downturn.
2. Index funds, Federal Treasury ETFs, and government bonds
One of the top safe havens to nest your money during a downturn lies with the U. S. government. Whether you believe that Fort Knox is stocked with gold or secretly empty, there are few more stable places to keep your funds.
Index funds differ from market ETFs in one significant way: they are not exchange-traded funds. Unlike ETFs, you can only buy or sell index funds at the price that the market sets at the end of each trading day. This makes index funds generally less volatile than ETFs.
If you’re interested in stock market investing but want to hedge your bets, do your research, and then discuss a balanced and risk-averse portfolio game plan with a reputable investment adviser to get started. You can invest in index funds that cover everything from robotics to gold mines, health care to real estate, pharmaceuticals to fintech, etc.
One of the most stable investments in safe havens involves federal ETFs or savings bonds. As debt securities issued by the U.S. Department of the Treasury, savings bonds sometimes garner low returns, but they are also fully backed by the U.S. government.
Unlike mainstream bank accounts, be aware that the FDIC’s insurance doesn’t cover stocks and bonds. You can find several market ETFs that give investors access to a broad range of government bonds. Treasury ETFs rank high for reasonable interest rates and usually give more back to investors than other types of bonds available on the market. For instance, from November 2021 to April 2022, the typical U.S. Treasury bond offers investors a solid 7.12% interest rate.
The good news is that you don’t have to pay a fund manager to perform an ETF investment for you. Instead, you can buy your own Treasury bonds. As a bonus, Treasury bonds are highly liquid. When you decide to sell your bonds, there will always be a buyer.
3. Utilities stocks
Essential utilities such as water, electricity, and waste disposal services are so common that many investors don’t even know to invest in these types of safe havens. Even during market downturns and economic issues, most Americans will do whatever it takes to keep the lights on, the heat or AC running, and keep the minimum utility standard.
- Because there is always a lot of demand for utility stocks, they are some of the safest investments you can make.
They’re the kind of defensive stock that grows during prosperity and stays above water during hard times. Utility stocks usually increase in value, but they also pay investors some of the highest dividend rewards in today’s market. These dividends offer a safe haven security option even when the stock dips or flatlines.
4. Real estate
As Mark Twain once famously said, “Buy land. They’re not making it anymore.” While real estate comes with risks, it can also offer rewarding growth. Some risks to watch out for can include tenant problems, a high vacancy rate, rental property damage, or negative cash flow. If you’re looking for a safe haven investment, renting out land to farmers is a popular option.
You don’t need to know anything about farming or even get your hands dirty to take advantage of this option. According to the USDA, almost half of the 911 million acres of American agricultural land is rented out to farmers by non-operator landlords.
Some of the world’s billionaires made their fortunes in real estate. Bill Gates owns the most privately invested farmland across 19 states. Need any further convincing? Warren Buffet, the Oracle of Omaha, doesn’t know about farming. Nevertheless, he’s owned a prosperous farm in his home state for 30 years.
5. Precious metals
It’s no secret that precious metals are a stable and popular choice for safe havens in today’s market.
Gold and silver remain two of the oldest currency forms. Global economies used to back their paper currency with gold, silver, or other precious metals. This offers continuous economic stability.
When there is a downturn in the economy, people buy precious metals like gold bullion or precious metal ETFs, which stay or even rise in value.
6. Cold, hard cash
You probably knew that this one would make a list. As the king of financial safe havens, it’s hard to argue against storing at least some of your assets safe in purely liquid form. Moreover, it’s probably a smart thing to do.
Since no investment is ever completely risk-free, cash offers a sense of security. Of course, you won’t earn any dividends or interest on your cash stash. But, likewise, you won’t gain potential growth if the cash isn’t invested in a bear market.
If you don’t feel like stuffing cash in your mattress, another option is digital assets. At the same time, holding a cash reserve is the most stable safe haven of all. It can give investors peace of mind, but it means that you have the money you need to secure your future in case an economic downturn occurs.
To diversify your stocks and bonds is to undergo an effective risk management strategy that enables you to invest in a range of different financial assets which can play a key role in reducing the risk of damaging losses occurring.
This can be extremely beneficial during times of high inflation like that of today. As the soaring cost of living is leading to more investor sell-offs of previously strong stocks, diversification helps to ensure that all your eggs are kept in different baskets and are thus stronger during a downturn.
As the record-breaking inflation of today is being impacted by multiple factors surrounding the Covid-19 pandemic and geopolitical tensions, the stocks that are being impacted by the downturn in unprecedented ways - making a diversified strategy far safer over a long term basis.
The Importance Of Diversification
Let’s imagine that you decide to buy stocks in an industry that you believe will have high potential in the future. Share prices are likely to go up as the industry continues to grow, but are liable to go down in the wake of any negative news surrounding the industry and any disruption caused to the companies that operate in the space. In such an event, it’s likely that your portfolio will suffer a significant drop in value if it’s not balanced out by other investments.
When this happens, it can be a good idea to look at what’s causing your chosen industry to struggle. In 2020, the emergence of Covid-19 brought chaos to air travel as international borders were closed and thousands of flights were cancelled.
As a result, other stocks focused on digital entertainment like Netflix and remote communication apps like Zoom rallied as holidaymakers were forced to stay home and interact with friends online. We also saw ‘staycations’ become more popular as lodging marketplace Airbnb’s stock rallied in late 2021 amidst the outbreak of the Covid-19 Omicron variant.
This diversification away from travel stocks ensures that an industry downturn won’t be too impactful across portfolios. It’s also important to diversify among different asset classes. Different assets like bonds and stocks don’t behave the same way to adverse events, and the combination of asset classes like stocks and bonds can reduce a negative response from within your portfolio to adverse market events because they are likely to move in opposite directions. This means that negative movements can be effectively offset by positive ones in different markets.
Another key factor when it comes to diversification is geography. It’s essential to look for stocks and bonds that don’t operate within the same country as others. This means that a domestic financial crisis won’t hurt the entirety of your portfolio.
Playing The Long Game
The stock market can be an extremely mysterious place, and the highest performing assets of today rarely sit still. Whilst stocks are generally the growth engine of portfolios, they also endure many bumps along the way which can see losses accumulate.
Image by Schroders
As the chart above shows, the highest performing asset classes have varied wildly throughout the 21st Century, and the recent inflationary period is likely to lead to a fresh period of market volatility over the coming years.
“Investors should use a selective overall strategy and not forget about diversification,” noted Maxim Manturov, head of investment advice at Freedom Finance Europe. “This includes an emphasis on quality deals that are based on solid balance sheets and high cash flow generation. Also one of the ways to guard against market uncertainty is to abandon stocks with troubled balance sheets, which benefited from stimulus during the pandemic.”
This can be a difficult approach for investors to come to terms with. After all, if you believe in an industry, you’ll likely find it difficult to move your money into markets that you’re less passionate about. However, it’s these mitigating moves that can keep your portfolio stable when an unexpected negative turn in the industry occurs.
Significantly, many investors have turned to bonds as a type of ballast for a portfolio, with prices rising and falling at a less severe rate than stocks which can help to keep portfolios protected.
Adopting A 60/40 Stocks And Bonds Strategy Can Help
In response to the inflationary pressures facing portfolios worldwide, we’ve seen more investors take on a stock to bond ratio of 60% to 40% respectively. This helps to protect investors from reversals of correlations without the risk of shedding their wealth.
Vanguard data suggests that many investor portfolio asset allocations have been tilting towards stocks at around 80% coverage over 60% - this is an extremely risky strategy to take during times of high inflation and one that could risk devaluing a portfolio.
Fundamentally, portfolio outcomes are determined by investors’ strategic asset allocations. However, this is good news, because it means that well-balanced portfolios can pave the way for investors to continue seeing healthy performance within their assets whilst staying protected from the next challenge set to test global markets.
While demo trading is advisable for beginners to get familiar with the market ecosystem, some argue it could instil overconfidence in a new trader. Live trading conditions are quite different from demo conditions and we will discuss why.
Who uses demo accounts and who are they meant for?
Demo accounts are used by both new and old traders. Karan of Safe Forex Brokers UK explains, “Demo trading accounts are meant for traders to test out strategies and learn without risking their money. It is used in all financial markets like Stocks, Forex, Derivatives etc. Day Traders often use demo trading to test their strategies and to see how each scenario would play/work in a real situation before putting in any money.”
Demo trading accounts are designed so that new traders can have a canvas to practice and perfect their strategies before going in with real money. They apply all the theories they have learnt and see the outcome whether profit or loss without worrying about losing their real money.
After a new trader reads about trading and gets familiar with all the jargon such as Spread, Pips, short and long positions, stop-loss orders, etc. They still have to put all that theoretical knowledge to the test.
Demo accounts make new traders conversant with the trading software interface and reduce the nervousness that usually accompanies live trading. New traders know where each button is located, can place orders, and get a general feel of the market. For example, in theory, we know stop-loss orders can be set above or below the price of an asset but demo accounts allow you to practically set the stop-loss and gives clarity to the new trader. Old and experienced traders can also use demo trading to test new trading methods and strategies before they apply them in live trading.
How does a demo account work? How can you use demo trading?
To open a demo account, you simply choose a regulated broker and download their trading app from the online app store or use the web version of the app if you like. The demo account is an integral part of the real trading app so you don’t have to download a separate app for the demo account. After downloading, you fill out all the documentation and open your account. Most brokers do not charge any fee for demo accounts. Your login details are normally sent to your email, and after that, you can activate your account and access it for simulation.
A new trader is assigned virtual trading money and can access the various markets like currency pairs, stock, indices, precious metals etc. provided by the broker. He can also have access to derivative products such as CFDs while demo trading. The environment is simulated to mimic a live trading session and the new trader can place buy or sell orders, set stop-loss orders, etc.
When you log in, you will see live trading and demo trading buttons. If you select demo trading it takes you to the simulated environment and you notice your account has cash in it. That cash is not real and is meant for the simulation. The cash decreases as you open trading positions or record losses and increases when you record profits. If you lose all your virtual cash, you can reset the simulation and start over again.
Why should you use a demo account? How is it beneficial to traders?
Demo trading has several advantages such as:
- Freedom to make mistakes: As a new trader, you can satisfy your curiosity and try out all different scenarios in your imagination without the repercussions of losing real money. While practising, you can update your trading journal and learn from your mistakes.
- Zero risk: Demo trading is completely risk-free so you can try out big transactions running into thousands of dollars without being afraid.
- Building confidence: When you trade and record profits it makes you feel good about yourself and builds confidence when going into live trading
- Practice how to apply risk management tools such as stop orders.
- Test your trading strategies
The conditions are different when you go live
By the time you are through with demo trading and you go live some realities become evident. Some conditions change such as:
Execution speed
When you open a trading position, you need to perform an opposite trade with a counterparty to close your position. In demo trading, a ready counterparty is always available so you execute your buy or sell order speedily at the intended price.
However, in live trading, you might have to queue and wait for a ready counterparty and by the time you find one, the price of the asset may have changed or slipped away from the initial price. This is called slippage and it can interfere with your trading plan and increase your losses or reduce your profits. There is no counterparty risk in demo trading but there is in live trading.
Stop-loss orders could also gap past the stop price in real life forcing you to close your position and execute your market order at another price. In demo trading the conditions are ideal and this may not happen so it will come to you as a shock in live trading and may cause you to record some losses. General platform execution speed could also be slower with longer loading times and this is something new traders will be surprised to find out in live trading.
Fees and commissions
Some demo accounts may not include all the fees and commissions applicable when you are trading live. When you suddenly see certain fees charged during live trading it can throw you off balance and affect your plans.
Trading capital
Demo accounts allow you access to huge capital and when you trade with so much capital you become careless and small losses don’t mean anything to you. However, when you go live, small losses suddenly mean so much since your capital is small and you may be using leveraged funds.
Emotions
Emotions change while trading live. While demo trading, there’s neither a feeling of fear, greed, nor pain. But all these emotions come alive during live trading. Your emotions awaken from sleeping to actively work against you on the trading floor.
The pain of drawing down and watching your hard-earned money keep reducing and eventually disappear can be difficult to bear. The fact that you find out you are not as good as you thought you were can be embarrassing and, unlike in demo trading, you can’t just reset your system and start again. Things you took for granted in demo trading suddenly begin to matter in live trading and your emotions can cause you to overtrade, revenge trade and sometimes cause you to panic and make a wrong decision.Overconfidence is another emotion to watch out for because making profits in demo trading doesn’t necessarily mean you will replicate the same feat in live trading.
Stress
Swing traders who hold positions for several days sometimes have to monitor their open positions and this can be stressful. Day traders also encounter a lot of stress because they have to be monitoring the market constantly. However, in demo trading, you can open positions and go to sleep and come back whenever you like since you know that real money is not at stake. The stress levels in live trading are extremely high.
Does demo trading improve trading skills?
Demo trading gives you a general idea of how to navigate your way and use the trading software but you improve your investing skills through day-to-day live trading and interaction with other traders.
In demo trading, the conditions are designed to be ideal and free from manipulation, re-quoting, counterparty risk, stop- loss hunting etc. But this is not exactly the case in the real world.
The ultimate aim of a demo account is to encourage you to transition to live trading as soon as possible and this is part of the reason it is offered for free. Some rogue brokers may target new traders who are fresh from demo trading school and trade against them knowing they are still overconfident. The conflict of interest between a market maker, broker, and trader means brokers benefit more from a trader’s loss than from a trader’s gain. When picking a broker, take your time and also focus on low fees rather than low spread.
Should you trade live if you are successful in demo trading?
Probably not! Karan from Safe Forex Brokers advises that, “it is not guaranteed that you will get the same results in live markets, as emotions come into play when real money is invested. Also, trading conditions might differ in live, depending on the data feed and platform provider.”
“One must practice for at least six months and start with small capital that they can afford to lose once trading live for the first time to test out any strategy.”
Moreover, day trading can be risky in live markets and requires time tested strategies and years of experience. It is better to invest for the long term rather than do day trading if you are a new investor.
Beginners must also avoid markets and instruments like derivatives, CFDs, Commodities and forex as these are more volatile in nature and require years of experience to learn and perfect trading strategies and style.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should buy this week.
Tesla
By now, Tesla is renowned for its well-performing stock as well as its prolific CEO, Elon Musk. But, the company has reached new heights, delivering 310,048 cars in the first quarter of 2022.
Despite ongoing supply chain interruptions and China’s zero Covid policy, Tesla broke their own sales record – delivering nearly double the 184,800 cars in Q1 2021.
With Tesla’s Berlin factory up and running, and the increase in overall production, momentum will only grow for the company.
Whilst this progress is impressive, it is the news of a stock split that has accelerated Tesla’s stock price. Investors may see this as a green light to invest in Tesla stock but they should be wary that a stock split could have little to no impact on the overall stock price.
An added facet for investors to consider is the concerningly high valuation of the company. This gives very little room for the company to stall or misstep, something which comes with the territory of the market.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance is not indicative of future results.
1. Purchasing Out-Of-The-Money (OTM) Call Options
OTM call options might have a very affordable cost. It might seem to you that you can easily make a profit on them: just purchase them when they're cheap and sell them when their price goes up. This pattern might work occasionally — but it won't help you to make money consistently. It would be reasonable to consider selling an OTM call option on a stock that you already own. By doing so, you'll resort to a covered call strategy that might help you earn funds sustainably in the long run.
2. Misunderstanding Leverage
Traders who're just getting started might incorrectly assess the risks that leverage involves. They tend to purchase many short-term calls. It would be wiser to master leverage using just 1% of your share lots for a test. If you succeed — then, feel free to carry on. If you can't make a profit on the test lots, you might want to discontinue using leverage.
3. Lacking An Exit Plan
Before you start trading, you should decide at which point you will stop. You should determine:
- Upside exit point
- Downside exit point
- Timeframes for both types of exit
From the onset, you should learn how to balance trading with everyday life. You shouldn't stay glued to your computer 24/7. Reach your goals, have a rest and start the next trading session tomorrow.
4. Hesitating To Test New Strategies
Once you detect a profitable strategy, you don't need to remain with it forever. To be able to make a handsome and steady income on trading options, you need to be flexible. Use some part of your assets to test new strategies and don't get upset if some of them fail to work with you.
5. Trading Illiquid Options
The term "illiquid" means the following: when you want to sell your options, you either can't find buyers for them — or you'll cause a significant price movement by selling your options. Ideally, the open interest should be equal to 40 times the number of contracts you'd like to trade or exceed this number. This means that if you're planning to sell a lot that consists of 15 items, there should be an open interest of 600 contracts or more.
6. Waiting Too Long To Buy Back Short Options
This might happen because you might strive to maximise your profit or avoid paying the commission. Instead, you should remember: if you can keep 80% or more of your initial gain from the sale of the option, it would be reasonable to buy it back.
7. Legging Into Spreads
Many novice traders tend to buy the option first and sell the second option later, which is known as "legging into a spread". By doing so, they hope to minimise risks — but in fact, they risk too much in exchange for a too-small reward. The right approach is to perceive a spread as a single trade. You shouldn't expect the market to move in your favour.
8. Lacking A Plan For The Situation When You Get An Early Assignment
When selling options, you should realise that you might be assigned before the expiration date. That's particularly important if you stick to a multi-leg strategy. You need to think in advance of what you would do after getting an early assignment. You might opt for a call or a put. Plus, you should determine whether you want to get your cash as soon as possible or later.
9. Trading On On Unreliable Platform
Here are a few examples of how unreliable platform might turn you down:
- Turn out to be a scam and steal your money
- Leak your private data
- Fail to provide you with the tools that you need for productive trading
- Go down because of a sudden spike in traffic
To find a credible platform that caters to Australian traders, you might want to check aubinaryoptions.com. There, you'll discover an impartial list of top platforms and the criteria for choosing the best one.
Final Thoughts
Hopefully, you found this article informative and now you have a better understanding of which mistakes to avoid when making your first steps in options trading. Traders with little experience tend to buy out-of-money call options, misunderstand leverage, lack an exit plan and avoid testing new strategies. They might trade illiquid options, wait too long to buy back short options, leg into spreads and not know how to cope with an early assignment. You should strive to avoid these mistakes. Most importantly, you should trade only on a reputable and reliable platform.
Could there be faster appreciation?
Pre-construction condos are a good investment because you can often (though not always) buy them at a discounted price. The developer needs to sell all the units in order to start construction, so they will offer significant discounts (10-20%) off the future list price. This allows you to get into the market at a lower price point and enjoy appreciation as the building completes and condo prices increase.
Are you investing in a desirable and up and coming neighbourhood?
Pre-construction condos offer a great opportunity to invest in up-and-coming neighbourhoods. Developers are always looking for new areas to build in, so they are usually the first ones to jump on hot spots. This means that you can get in on the ground floor of a potentially trendy and desirable new neighbourhood and enjoy appreciation as it becomes more popular. This is an especially attractive proposition in real estate markets that are already hot and prices are high. You might be able to scoop up a presale in a city like Miami, for instance, at a great bargain.
What is the developer's reputation?
When you are considering a pre-construction condo, it is important to research the developer. You want to make sure that they have a good reputation and track record. Many fly-by-night developers disappear after selling a few units, so you want to make sure that the developer is reputable and has a good track record. Doing your due diligence on a real estate developer is one of the most important steps when considering a pre-sale. If the developer has a long list of successful projects to their name, then you can be confident that they will deliver on their promises.
What is the quality of the construction?
It is also important to research the quality of the construction. You want to make sure that the developer is using high-quality materials and that the construction is up to code. There have been many cases of shoddy construction in pre-construction condos, so you want to make sure that you are getting a quality product.
What are the amenities?
Another important consideration is the amenities. Pre-construction condos usually come with a host of amenities, such as swimming pools, gyms, and concierge service. These amenities add value to the condo and make it more desirable to live in.
What is the maintenance fee?
You also want to consider the maintenance fee. Maintenance fees are the monthly fees that you pay to the condo corporation for the upkeep of the common areas. These fees can vary widely, so you want to make sure that you are getting a good deal.
What is the occupancy rate?
The occupancy rate is the percentage of units that are sold. This is important because you want to make sure that the building is not oversold. If the building is oversold, it can lead to problems down the road, such as special assessments and legal problems.
What are the bylaws?
Bylaws are the rules and regulations that govern a condo corporation. You want to make sure that you are comfortable with the bylaws before you invest in a pre-construction condo. The strata councils that make the rules are sometimes not well-liked by certain owners for a variety of reasons, including rules that are too restrictive or that raise the monthly maintenance fees.
What is the resale value?
You also want to consider the resale value. Pre-construction condos usually sell for a premium, so you want to make sure that the condo will appreciate in value. You need to ask yourself what you already know about the area in which the condo is being built and the likelihood that it will appreciate in value.
Are you prepared to wait?
Finally, you need to be prepared to wait. It can take a few years for a pre-construction condo to be built, so you need to be patient. This is not a short-term investment, so you need to be prepared to wait for the full value of the condo to be realised.
Are you getting a good deal?
The most important consideration is whether or not you are getting a good deal. Pre-construction condos are a great investment, but you want to make sure that you are getting a good deal. There are many factors to consider, such as the developer, the quality of construction, the amenities, and the maintenance fees. You want to make sure that you are getting a good deal on all of these factors.
Conclusion
The above are the most important considerations when thinking about investing in a pre-construction condo. If you do your due diligence and consider all of these factors, you will be on your way to making a wise investment.
When 2021 ended, it was as if the whole world breathed a sigh of relief. Although we still felt the effects of the Covid pandemic, we were ready to leave the last two years behind and move on to better and brighter times. So when the news broke of Russia’s invasion of Ukraine on February 24, it sent shockwaves across the globe.
To condemn Putin’s war, western leaders announced some restrictive economic measures to target Russian financial institutions and individuals. But as Russia is one of the leading suppliers of gas and oil worldwide, these sanctions have seen prices for these resources shoot up in the US and UK and add further pressure to the already volatile economies. In fact, the US is experiencing its highest inflation in 40 years and the UK is currently facing its worst recession since the 1970s, and many experts predict we are on the brink of the next big global financial collapse.
What does this mean for investors and their money?
During times of crisis, many will opt to put their money into investment funds, like the S&P 500, or ISAs to mitigate the risk of any major financial losses and hopefully still be able to grow their investment portfolios. But indications show that the S&P 500 is on a downward trajectory and may no longer be the most future-proof option for investors. Similarly, the money put into ISAs will lose its purchasing power as inflation levels rise.
What can investors do to mitigate the negative effects of inflation?
Enter alternative investments. Alternative investments like gold, wine, art, and real estate are examples of options that have for many years been used by investors as a hedge against inflation. Referred by many as ‘inflation or recession proof’ these alternative investments, alongside commodities and cryptocurrency, have proven to yield higher returns despite financial crises.
To gauge how recession-proof the different alternative asset classes are, we look at their performance during historical periods of recessions or market turmoils. For example, between December 2020 to December 2021, inflation grew by 7%. Meanwhile, wine grew by 19.10%, art by 58.81% and Ethereum by a whopping 2724%. So, it is understandable why during times of crisis, financially savvy investors turn to these options for investing and to safe-up their portfolios.
However, there is a less talked about option that has been going through a revival, despite being one of the oldest forms of investment assets - coloured gemstones. In the last decade, coloured gemstones have experienced some of the biggest price jumps in history. In 2015, the world’s most expensive ruby was sold at auction: a 25.59-carat gem, known as the Sunrise Ruby, for over £22 million. Just two years later, the world’s most expensive emerald The Rockefeller Emerald, weighing an impressive 18.04 carats, was sold for just over £4 million.
Many people aren’t as clued-up on these unsung heroes of the alternative investment world and their lucrative yields. Compare it to one of the more known alternatives, gold. One kilogram of gold has a value of approximately £50,000, whereas one kilogram of fine rubies is worth upwards of £150,000,000, making it 3000 times more valuable.
Which gemstones are best to invest in?
Leading the gemstone space in terms of value and growth potential are rubies, sapphires and emeralds, which have increased in value by 5-8% per annum since 1995. And their upward trajectory continues. When re-certifying our own gemstones through Gemological Lab Austria (GLA), one ruby was valued over 19% higher in November 2021 compared to its initial valuation in September the same year.
Similarly, upon re-certification in 2021, a selected sample of sapphires experienced an average increase of 15.7% compounding annually, with a 6.1 carat Sri Lankan Sapphire at the top end of the spectrum, which had a total increase of a staggering 194.1%.
Much of the rising popularity of coloured gemstones is due to the growing awareness - primarily via the internet, social media and marketing - but also due to developments in recent years that have boosted consumer confidence, such as widespread certification, further industry transparency, and gemological analysis.
And as a result of the Covid pandemic and the economic uncertainties that have followed, more people are seeking ways to make smart investment choices that will strengthen their portfolios and make more lucrative returns in the long run. Crypto has become one of the more popular alternatives for financially ambitious investors during this time, but it’s a highly volatile space and therefore comes with a lot of risk.
But the initial charm and excitement of investing in this space are beginning to wear off - Bitcoin for example has lost half of its value since hitting a record high in November 2021.
Taking coloured gemstones’ growing popularity in the last couple of decades and combining it with more financially curious and risk-averse investors entering the market, we can only expect these precious gems to increase even more in value over time and become a leading alternative investment option. They really are called precious for a reason.
About the author: Dr Thomas Schröck, CEO and Founder of The Natural Gem.
Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should buy this week.
Intel
The pandemic unearthed many key trends, one being the demand for semiconductors and computer chips.
Part of this demand is due to the versatility of computer chips being used in various sectors including the automotive industry and with 5G rolling out around the world, this momentum will only increase.
Whilst Intel was once dominant in the industry, it has since been surpassed by competitors such as AMD and Nvidia, who innovated quicker and more effectively.
Therefore, investors should consider Intel’s pace of innovation before taking bets on the stock.
Despite this, Intel is hedging on production to Asia being outsourced and has announced plans for a $17 billion production facility in Madgeburg, Germany.
By reducing the competitive edge of production in Asia, Intel is hoping to rediscover its success and market share. However, this will hinge on protecting their market share of existing chips, whilst innovating at the same time. Only then, might Intel stock be attractive for investors.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 89% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Not investment advice. Past performance is not indicative of future results.
Gemini’s survey of 2,300 people in the UK found 18% had some type of cryptocurrency investment, with nearly half (45%) investing for the first time last year.
The research suggests a significant jump in crypto ownership across the past 12 months, with research from the Financial Conduct Authority (FCA) estimating that just 3.9% to 4.4% of Brits had invested in the asset last year. This jump coincides with a rally for the market, with Bitcoin reaching an all-time high of over $68,000 in November 2021.
In a comment, Gemini’s UK boss Blair Halliday said, “2021 was transformational for UK cryptocurrency ownership. Confidence in and awareness of crypto has increased dramatically.”
“We believe education is the key to enabling wider audiences to safely access and capitalise on the immense opportunities that crypto represents.”
Another benefit of online trading is that it provides access to a wide range of stock markets around the world. You can invest in Amazon, Tesla, cryptocurrencies and many other assets which can offer opportunities for diversification. Finally, online trading is often faster and more efficient than traditional methods, such as calling a broker on the phone. This can save investors time and money. Overall, online trading offers many advantages that can be beneficial for investors of all experience levels.
How can we earn money by online trading?
There are many ways to make money online, but one of the most popular and potentially lucrative is online trading. With online trading, you can buy and sell stocks, commodities, currencies, and other securities through a broker or an electronic exchange. Trading can be volatile and risky, so it's important to do your research before you start investing. Here are some tips for getting started with online trading:
Choose the right broker. When selecting a broker, it's important to consider factors such as costs, experience levels, and investment options. Some brokers offer free trades or commission-free products, while others may have higher fees. Make sure the broker has a platform that suits your needs and offers a variety of investments to choose from.
Do your research. Once you've selected a broker, it's time to start researching potential investments. Consider factors such as a company's financial stability, its history, and the overall market conditions before making any decisions.
Create a diversified portfolio. Don't put all your eggs in one basket - diversify your portfolio to minimise risk. Invest in a variety of different securities, including stocks, bonds, and commodities.
Monitor your investments. Keep an eye on your investments and make sure they're performing well. If you see any red flags, sell off your position and move on to something else.
Online trading can be a great way to make money, but it's important to do your homework first. With a little research and some careful planning, you can start trading and earning profits in no time.
What is the right time to start online trading?
The right time to start online trading depends on several factors. If you have some experience with the stock market and are comfortable making your own investment decisions, then you may be ready to start trading online. However, if you are new to investing, you may want to consider taking a class or working with a financial advisor before starting to trade online. Additionally, it is important to make sure that you understand the fees and risks associated with online trading before getting started.
When it comes to online trading, there are a few things you need to know in order to be successful. First and foremost, you need to have a clear understanding of what you're trying to achieve. Are you looking to make a quick profit, or are you hoping to build a long-term portfolio?
Next, you need to select the right platform for your needs. There are a variety of different platforms out there, so it's important to do your research and select the one that best suits your goals and objectives.
Finally, once you have a platform selected, it's time to start trading! Be sure to keep an eye on the market and always know when it's time to buy or sell. With a bit of practice, you'll be a successful online trader in no time!
Conclusion
Online trading is a great way to invest your money and make a profit. There are many different platforms available, so it's important to do your research before choosing one. Make sure to read reviews and compare prices before making a decision. It's also important to be aware of the risks involved in online trading. Always consult with an expert before investing your money.
According to Robinhood, users of its new card, which will be offered by a new subsidiary of the company, Robinhood Money, can round up their change to the nearest dollar and invest this sum in assets of their choice. Robinhood will also reward users of this new feature with a weekly bonus, the company has said.
Other consumer finance apps, such as Chime, already allow spare change investing. This is a feature proven to be popular with younger consumers in particular.
The new card will allow users separate accounts for investing and spending and will come to replace Robinhood’s existing cash management product. Customers will have the option to receive cheques up to two days in advance via direct deposit. If users wish to do so, they can also choose to automatically invest a portion of their cheques.
Robinhood has said that these new features will all be offered to users free of charge.
