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.

The FTSE 100 dropped 0.3%, while France’s CAC was down 1.1%. In Germany, the DAX fell 1%. Across the pond, US benchmarks closed lower on Monday. Wall Street’s S&P 500 dropped around 0.1%, as did Nasdaq and Dow Jones.  

World Bank Chief Economist Carmen Reinhart has warned that the global economy is experiencing a period of “exceptional uncertainty.” Reinhart cited an “array of disruptions”, including lockdowns in China, soaring food prices, and the conflict in Ukraine. She said she would not rule out further downgrades to the growth outlook.

On Monday, the World Bank slashed its global growth forecast for the year by almost a full percentage point, to 3.2% from 4.1% because of the added economic pressures of the war in Ukraine. 

"Unsurprisingly the weak economic outlook, uncertain geopolitical situation and rising inflationary environment has prompted the World Bank to cut its 2022 global growth outlook," said Michael Hewson, chief market analyst at CMC Markets. "This move is likely to be followed by the IMF later this week as it gets set to meet in Washington."

Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should buy this week.

Gamestop

Retail investors will be aware of Gamestop given the influence the stock had over the course of the pandemic. Once again, the stock is fast gaining attention.

In the last 12 months, the company has massively increased sales to 30% year on year. Also, with Gamestop set to enter the NFT space, its growth is likely to continue – similar to that of companies such as OpenSea.

Despite net sales rising by 6.2% to $1.88 billion, the firm reported a net loss of $147.5 million proving that Gamestop remains a high-risk bet.

Investors need to consider the combination of supply chain issues and the Omicron variant before taking bets on the stock. Gamestop is likely to take a while to rebuild, especially given the company’s loss and worldwide shift towards digital gaming solutions.

Whilst the NFT marketplace grew to $41 billion in 2021 and therefore offers strong opportunities for growth, Gamestop will ultimately have to turn profitable to gain investor confidence. 

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. 

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.

Between 2020 and 2018, the field of socially responsible investment grew to a valuation of 17.1 trillion USD. Companies that align with ethical investment now hold 33% of assets managed in the United States, too, and that number is poised to grow in the near future. 

What is ethical investing?

Ethical investments support businesses responsible for positive social or environmental change. Instead of investing in corporations with horrible discrimination policies and histories, many consumers instead search for companies that promote employees regardless of gender, race, or disabled status. Understanding ethical stocks & shares investing is an increasingly important tool for modern traders interested in building socially responsible portfolios. Luckily, trusted authorities in the world of financial brokers and investments, AskTraders, have put together a guide to make finding smart investments a bit easier.

What can consumers who are interested in socially responsible and ethical investing look for when considering new investments? From workers’ rights to environmentally conscious companies and more, here are some business activities and issues to keep in mind. 

Environmentally conscious companies and stocks

Discussion about the environment and the many ways humans can negatively affect it is increasing as temperatures rise worldwide. The search for environmentally friendly businesses and businesses dedicated to actively improving the environment is on the rise. Many potential investors are on the lookout for stocks that seem to represent decisive action on the issue of environmental health.

If this issue is important to you, you should look out for businesses taking action, not simply those paying lip service to the idea. A corporation that extolls the virtues of green energy while sending massive carbon emissions into the environment daily, in other words, is probably not the best investment you could make. Look at future goals and steps that have been taken in the past to advance the good of the environment. 

Animal welfare

The idea of “cruelty-free” products has been an increasingly important one for decades. The concept has become an important one in the broader financial industry, even outside of industries that might be traditionally tied to things such as animal testing. More and more consumers want to know if the creation or use of a product involves harming an animal and if the people running companies support animal welfare. 

From cruelty-free stocks to stocks that emphasise vegan products, there are many businesses espousing animal rights around the world. And while they might not be the most profitable, investors interested in ethical trades should keep this issue at the forefront of their minds. 

Equality

Social justice continues to be an important aspect of today’s society. What do the companies you are considering investing in say about equal hiring and employment practices? Do their actions match those claims? Consider equal opportunity records and policies before investment. Be diligent with research, too, and keep in mind that equality refers to gender equality as well as racial equality and even disabled worker equality. There are many ways companies can show support for diverse populations (or ways in which they can ignore them). 

Workers’ rights

Another crucial ethical investment consideration is how companies handle workers’ rights demands. Some businesses are actively on the lookout for issues impacting their employees’ health and productivity, especially as the world grapples with the COVID-19 pandemic. Others, however, are less concerned. From employing children to firing ill or disabled employees and much more, the issue of workers’ rights is an ever-evolving one. 

Finding the perfect ethical investments

What issues are important to you? Finding the perfect ethical investments begins with investors who know what matters to them. List some of the issues most important to you, be it something listed above or an entirely new issue. Now look for businesses that align with those topics. Do your research before investing, and do not be swayed by polished websites with no substance. You are looking for action, not simply well-written declarations. 

Are you ready to get started with ethical investing? Keep the information above in mind, and do not be afraid to reach out to professionals for help. Remember that investing is not a race, no matter how exciting the initial rush might be, and sometimes sleeping on a decision is the best way to move forward. 

“If women are less likely to invest, they could face further disadvantages in the long term,” says NatWest. “They may find it harder to be financially independent and could be more likely to face financial difficulty in old age because their pension savings are lower than men’s.”

Finance Monthly speaks to Camilla Stowell, Head of Client Coverage for Coutts, part of the NatWest Group, about the reasons behind the gender investment gap, the benefits women are missing out on, and how NatWest Group is helping to close the gap.

There are undoubtedly many factors at play but, ultimately, why are women less likely to invest?

The wealth industry has not normalised investing for women, who are more likely to talk about money with friends and family instead of financial institutions. 

Findings from The Wisdom Council (March 2021) show that women now earn the same or more than their male partner in almost 30% of households in the UK, yet men are 10% more likely to hold an investment product than women in the UK according to the OECD. Boring Money also finds that only 13% of British women have a stocks and shares ISA. 

These findings show that the investment gap goes beyond financial issues, and is inherently tied to women’s choice, freedom and security. That’s why it’s more important than ever to address the gender savings, advice and wealth gap, with financial institutions taking responsibility to engage with women in a way that is relevant to them. 

What benefits are women missing out on by not investing?

The main benefits women are missing out are financial. Women continue to live longer than men, and yet have pensions provisions that are less than half of those of men on average.  

It’s also about financial confidence. Life events such as divorce and bereavement are stressful enough without having to worry about money, which can add to the stress. On average, 51% of the financial advice sought in the UK by women was post-divorce.

Women are also missing out on the opportunity to support the causes that are important to them. Women tend to use money to look after everyone else before themselves, and to be interested in the wider community and environment for the next generation.  Through investing responsibly they can use their capital to have a positive impact on the wider environment.

What is NatWest Group doing to close the gender investment gap?

NatWest Group has identified ‘improving financial capability’ as a focus area and is looking to address the savings and investment gap in two ways. 

This includes supporting female entrepreneurs to promote wealth creation and identifying to help with Financial Health Checks to review their personal finances. At Coutts, we do this as a matter of course through annual client reviews which helps establish our relationship with clients. 

Camilla Stowell, Head of Client Coverage for Coutts

We’re working hard to make sure that we talk to customers in a way that works for them, meaning we’re more inclusive and accessible and can help support financial goals. This has helped us gain a 185% increase in female investors in Personal Banking, a 20% growth in Premier Banking, and an 81% growth in Coutts, year on year. We’re also keen to support our female colleagues, running a series of events through our Wealth Gender Network. 

How can women make the most of their investments?

The main recommendation is to start now. However much or little you can afford, it all adds up. Make sure you’re enrolled on your workplace pension or consider starting a small private pension if you’re not eligible for a workplace pension. And, lastly, don’t be scared to talk about money with your partner. Whilst it might feel uncomfortable, it’s essential to understand how your finances are being used and how to manage them.

If you go to the doctor complaining of severe joint pain in the knees, the doctor will likely take you through diagnostic screening questions to see if your symptoms meet the criteria for various diseases, such as rheumatoid arthritis.

A stock screener is just like a diagnostic screener. As the investor, you answer questions based on your unique goals and portfolio, and the screener software spits back stocks that fit those criteria.

Just like with diagnostic screeners in medicine, screening stocks in this fashion is just one step in the process of finding the right stocks. You should always confirm your results by evaluating each stock’s fitness for your portfolio through your own research.

It’s also important to assess your financial situation and define your goals. As you can probably guess, this should happen before the screening stage, because your circumstances and goals will define your criteria.

To recap, here are the steps you should follow when screening for and selecting stocks:

1. Examine your circumstances and define your goals
2. Find stocks using a basic or advanced stock screener
3. Confirm findings through your own research

Choosing a stock screener

As you can see above, you have choices when it comes to how comprehensive you want your stock screener to be. Some screeners offer both basic and advanced versions – typically with tiered pricing or by subscription – while others are either free/basic or advanced/customizable only.

In this article, we’ll cover the benefits of advanced stock screeners, how to use them, and what kinds of investors they’re best suited for.

What is an advanced stock screener?

Think of the difference between how Macs and PC computers are marketed:

• Mac: Ease of use, good for beginners who don’t want or know how to make decisions about their computer’s operations and interfaces
• PC: Operations and interfaces are highly customizable, giving you more control, but this requires more experience and knowledge. With great power comes great responsibility!

Basic stock screeners are the Macs here. They’re great for when you’re first getting started investing, because they offer standard, simple metrics, such as market cap, P/E ratio, gains/losses by time period, share volume, etc. The key takeaway is that both basic and advanced stock screeners are useful, but for different types of investors.

Why should I use an advanced stock screener?

If you’ve been in the stock game for a while, you might be ready to get more hands-on with your stock screening process. Because advanced stock screeners offer a wider range of customizable metrics, they give you the chance to apply all that knowledge you’ve been gathering in ways that are more tailored to your unique portfolio.

In other words, they give you more control.

Are there downsides to advanced stock screeners?

Think back to the Mac vs. PC example. If you don’t know a lot about computers, using a PC with highly customizable operations isn’t very useful to you, because you don’t know what any of the options mean. In fact, it will probably make it harder for you to use the computer!

If you’re new to stocks, get your feet wet with the Mac of stock screening: basic stock screeners. As you get more familiar with stock trading through experience, you’ll finetune your portfolio and financial goals, and you can decide at any time to get your hands a little dirtier with advanced stock screeners.

Recap: Primary cons of advanced stock screeners

• Not good for beginners who know little about the different criteria
• Typically focus only on quantitative data, so you’ll need to consider qualitative factors separately
• Industry-specific blindspots

How to get started with stock screeners

TheBalance provides a great starter list of free and freemium (that is, free/basic and subscription/advanced options) screening software. Starting with free basic versions can be a great way to try out different screeners and find which one you like best, even if your goal is to eventually use an advanced screener.

Summary & takeaways

Remember, while stock screening is a crucial part of building your portfolio, it’s only one part of many. Follow the steps below to get the most out of both basic and advanced stock screeners:

1. Define financial goals and criteria
2. Use a basic stock screener (beginners) or advanced stock screener (veteran investors)
3. Finetune portfolio through separate research, looking out for industry blindspots and considering qualitative factors not included in the screener

Shane Neagle, Editor In Chief at The Tokenist, delves into value investing, exploring whether it is making a comeback, or whether it’s been here all along.

As savvy shoppers prefer to wait and buy a TV when it goes on sale rather than paying full price, a value investor seeks to buy a stock at a discount. This model requires a substantial amount of patience, diligence, and research—but it can also pay out well. 

Understanding Value Investing

Prices of stocks and other assets fluctuate based on demand, market sentiment, good and bad news, and other factors. At times, these fluctuations might leave a stock either overpriced or underpriced. This is why value investors are sceptical of the efficient-market hypothesis and believe a stock's price does not always reflect its intrinsic value. 

Value investors have the premise that they will own parts of a business when they purchase its shares. Of course, this is true for all investors—everyone investing in a business will own parts of it, even if they are not value investors—but some just "play the market," meaning they take action based on technicalities, and disregard the fundamentals. 

Value investors call the difference between a stock's current price and its intrinsic value "margin of safety." A higher margin of safety suggests there is the potential for more profitability and a lower risk of making a loss. Since not every value stock will turn its business around favourably, the margin of safety represents an investor's risk tolerance. 

How To Spot A Value Stock?

The prime feature of a value stock is that it is undervalued in comparison to its financial performance — metrics like revenue, earnings, and cash flow. Small businesses can record these using a simple accounting software. Yet as the company grows, the task of compiling such information by the company — and accessing such information by a researcher — becomes increasingly difficult. We’ll dive more into that in a moment.

Other defining characteristics of a value stock are fundamental factors like brand, long histories of success, business model, consistent profitability (even if insignificant), target market, dividend payment, and competitive advantage. For instance, Cisco Systems, Inc. can be deemed as one of the biggest value stocks available. The company, which delivers software-defined networking, cloud, and security solutions, tends to display most of the value stock characteristics. Here is a breakdown:

1. Since 2015, Cisco has been delivering between $47 billion and $50 billion in revenue every year (it has been profitable and has steady, predictable revenue).
2. It is a market leader in computer networking systems. In 2019, Cisco had more than half of the entire market for Ethernet switches.
3. It has a reputable brand worldwide, and its products are present in the Americas, Europe, and Asia.
4. It pays dividends (although this isn't a requirement).
5. Most importantly, Cisco trades for a relatively low valuation compared to most of its tech peers.  

However, it is worth noting that finding value stocks requires a reasonable amount of subjectivity — it can be more of an art than a science. 

Pros And Cons Of Value Investing 

As a favoured investing strategy by some of the world's most prominent traders, value investing comes with a number of unique advantages. In the first place, it offers the potential for significant gains. This is because value investors buy stocks at a discount and sell when they come to fruition (reach the estimated intrinsic value).

Moreover, since value stocks are already severely undervalued, they are not subject to the risk of suffering extended losses. This creates a favourable risk/reward ratio given that the stock is evaluated accurately. Further, considering that value investors buy for the long term, they also don't have to worry about short-term fluctuations and volatility. However, value investing also comes with a number of downsides. Firstly, it is quite difficult to identify undervalued companies. In addition to a certain level of expertise, value investors need to have a fair amount of subjectivity to be able to accurately estimate the intrinsic value of a company.

Furthermore, value investing requires a substantial amount of patience and diligence. At times, value investors might have to hold their positions for several years as it can take quite some time for the market to understand the value of a stock. Therefore, those who expect to reap the benefits fast might find that this strategy isn’t ideal.

Prominent Value Investors

Throughout history, a number of investors have managed to earn a name for themselves for being exceptionally successful value investors. Among them, two names stand out: Benjamin Graham and Warren Buffett.

Benjamin Graham was an economist, professor, and investor who is regarded as the father of value investing. He published Security Analysis in 1934, and The Intelligent Investor in 1949 as the founding texts of value investing. In his books, Graham described the concept of intrinsic value and the necessity for establishing a margin of safety when trading value stocks. Besides his books, Graham made contributions to value investing by mentoring legendary investors like Warren Buffett. Buffett, who is now CEO of Berkshire Hathaway and the world’s 8th richest person with a net worth of over $100 billion, studied under Graham at Columbia University and worked at Graham's firm for several years.

Following Graham's school of value investing, Buffet looks for securities that are unjustifiably undervalued compared to their intrinsic worth. He has become one of the world's most successful investors, earning himself the nickname "Oracle of Omaha," which implies other investors closely follow his investment picks and comments on the market.

Nevertheless, it is worth noting that many financial experts believe value investing is an old-school strategy. Some argue that the rise of hard-to-analyse intangible assets—assets that are not physical in nature—has made value investing irrelevant in 2021. A look at Keith Gill's investing strategy suggests otherwise, however. 

Keith Gill: The Modern Value Investor

Keith Patrick Gill, the guy who is largely known for his role in the GameStop saga, is a self-characterised value investor. Known as Reddit user u/DeepF***ingValue, he is a prominent trader within the retail-centric r/Wallstreetbets community. For his role in the GME phenomenon, Gill faced a class-action lawsuit and also had to testify before the House Financial Services Committee. In his testimony, he acknowledged that GME was undervalued compared to its intrinsic value. He said:

"I believed the company was dramatically undervalued by the market. The prevailing analysis about GameStop’s impending doom was simply wrong."

Gill also declared that he examines a company's value before investing. "As an individual investor, I use publicly available information to study the market and the value of specific companies. I consider a complex array of factors and track hundreds of stocks – all in search of market inefficiencies," he stated.

All of this suggests that Gill is openly a value investor. And even though it has become difficult to use value investing techniques due to the increasing complexity of the markets, value investing continues to remain alive and well.

In August, news broke that PayPal was exploring the possibility of creating a stock trading platform. This marks a considerable inroad towards retail investment, having rolled out the ability for customers to trade cryptocurrencies last year. 

The company has even hired brokerage industry veteran Rich Hagen as part of the move - who has reportedly become CEO of a previously unreported division of PayPal called Invest at PayPal. 

Image by Nasdaq

As the chart above shows, PayPal’s potential foray into the world of retail investing may have been sparked by significant growth in the user base of online brokerages throughout 2020. While the pandemic may have aided new customers in making their first trades through stimulus packages and the free time afforded by social isolation measures, it’s also worth noting that brokerages have become far more popular since adopting zero-commission payment for order flow operating models. 

So far, 2021 appears to be telling a similar story in terms of mass retail investor growth around the world, and experts believe that PayPal is eager to tap into this rise in adoption. 

“The surge in retail investing, as well as the knowledge that more than 10 million new investors entered the market in the first half of 2021, are driving PayPal's interest in this industry,” explains Maxim Manturov, head of investment research at Freedom Finance Europe. “PayPal wants to ride this wave while also keeping up with the competition. Since then, Robinhood Markets, Inc. has grown to over 22.5 million net accounts by the conclusion of the second quarter of the 2021 fiscal year, an increase of 129.6% year over year.

Meanwhile, Square, Inc., PayPal's main competitor in the payment processing sector, has already incorporated features to its Cash App payment service that make it easier to trade equities and cryptocurrencies. And this is a major milestone in the evolution of the PayPal ecosystem. PayPal is a well-known brand that handles 22% of all online transactions in the United States and has a high degree of consumer trust. These criteria indicate that if it enters the retail investment market, it will be rewarded with a more extensive user base.”

PayPal’s Industry Muscle

PayPal will be aiming to leverage its industry muscle to compete with established online brokerages like Robinhood. Today the payments giant is responsible for leveraging 22% of online transactions in the US, while also retaining a relatively high level of consumer trust along the way. 

Image by Insider

With such significantly high total payment volumes around the world, PayPal could feasibly enter the market as the largest brokerage on the planet, with some 400 million customers already in place worldwide. 

PayPal’s global reach may also help on its path to prominence, with the possibility of accessing markets that the likes of Robinhood haven’t yet accessed, due to Robinhood only being available for US-based customers at the time of writing. However, some market commentators have expressed their fears that, although PayPal boasts a significant global user base, it may be too late for a party that’s been building throughout 2020. 

Late To The Party? 

Despite its huge volume of users, PayPal may still run into trouble winning over retail investors for their new service - particularly in the US where Robinhood has already performed exceptionally well in months. 

In conversation with Motley Fool’s Industry Focus host Jason Moser, financial planner, Matthew Frankel expressed his bafflement that PayPal had taken so long to push forward with plans to launch their own online retail brokerage. 

“My other adjacent thought to that is, are they late to the party? Has everyone else already scooped up that? Stock trading exploded in the middle of 2020,” Frankel added, noting that in missing the pandemic investment gold rush, PayPal may find itself at a disadvantage in winning over users who may have already acquainted themselves with other brokerages. 

Image by CB Insights

As the data above shows, Robinhood’s monthly active users swelled to 20 million in the early months of 2021 - owing to the sheer volume of coverage that the platform received in the wake of the Gamestop short squeeze. The trading app has now become synonymous with meme stocks and although its reputation has taken knocks from many Wall Street stalwarts like Warren Buffett, it didn’t stop Robinhood from going public in the summer of 2021 and attaining a sizeable market cap of around $35 billion at the time of writing. 

However, PayPal is far longer in the tooth than Robinhood and the company’s market cap of $316 billion shows that it certainly has the resources to make a success of whatever new concentration it turns its hand to. Winning over Robinhood’s network of retail investors may be one thing, but PayPal certainly has the ability to mount enough of a campaign to woo new users. 

Regulatory Hurdles

However, a bigger hurdle may be lurking around the corner in the form of the regulatory boundaries that PayPal will need to navigate. If PayPal wants to create its own brokerage subsidiary, regulatory approval will need to take at least eight months to complete. The US Securities and Exchange Commission (SEC) has already made it clear that it’s concerned about the level of ‘gamification’ taking place in the retail investing market of late - and the arrival of new key players may compound those fears. 

Ultimately, the unease of the SEC may cause the required approvals to take longer, while the commission has also made it clear that it’s considering imposing a ban on the popular payment for order flow investing models that have helped to bolster the revenue of Robinhood and many other industry leaders. 

Should PayPal opt to create its own retail investing tool, it will be entering an industry that is perhaps at its most volatile stage. However, with an ever-growing base of active users, PayPal is aware that it’s tapping into an industry that’s become extremely popular in recent months. With the right navigation, the payment giants may be able to hurdle its uncertainty and make a big splash in the ever-popular retail investing landscape. 

Wise’s new investments feature, called Assets, allows customers to invest in BlackRock’s iShares World Equity Index Fund which tracks a basket of over 1,500 of the globe’s largest public companies. The fund’s holdings include Amazon, Apple, and Alphabet.

Users will also have the option to instantly spend up to 97% of the invested funds in their accounts via a Wise debit card and send money overseas. The idea behind this is that customers can hold their money in stocks but are also able to spend and send the funds in real-time. 

Wise’s CEO and co-founder Kristo Käärmann said: “Holding money in various currencies can be hard to manage efficiently. Assets is seeking to solve that problem, by providing an opportunity for customers to earn a return on their money with us, in a host of different currencies, all in one place.”

Wise explained that it is keeping back 3% of users’ invested funds as a buffer in case of any significant fluctuations in the market and to prevent users’ balances from dropping into negative territory. 

Wise has currently launched Assets personal and business for customers in the United Kingdom but plans to roll the product out to Europe in the future. 

There were 332,000 new initial claims for unemployment support in the week to 11 September, according to the US Labour Department. This figure is up from 312,000 in the previous seven days. Economists had been expecting 320,000 claims, accounting for a delay in filings following Hurricane Ida.

However, the four-week moving average was the lowest seen since the beginning of the covid-19 pandemic in March 2020. 335,750 claims were seen at this time. 

On the back of the news, US markets ticked lower while European stock markets continued to perform well. The S&P 500 dipped 0.6%, Dow Jones was down 0.5% and Nasdaq dropped by close to 0.7%.

Last month, US retail sales unexpectedly rose 0.7%, significantly ahead of the predicted 0.8% fall. This followed a 1.8% decline in July, implying that demand was more resilient than initially predicted, despite August’s hiring slowdown. 

The Commerce Department said that, with the exception of motor vehicle parts and petrol sales, underlying retail sales were 2% stronger throughout August. Home furnishing sales rose by 3.7%, while food and drink spending increased by 1.8% and general merchandise jumped by 3.5%. 

For companies, stocks are a great way to raise money to grow funds and capital or other products and initiatives. When you buy a stock of a company you are effectively buying a part of ownership or share in the company. It does not exactly mean you will sit next to Mark Zuckerberg in a meeting at Facebook if you buy a stock from Facebook. It means you get the right to vote in meetings when chosen to exercise it. Primarily, the reason to invest in the stock is to earn a return on the investment, and the return generally comes in two ways.

1. Price appreciation

This means when the stock goes up, you can sell it for a profit if you like.

2. Dividend

This exactly means payments made to the shareholder out of the company's revenue, and typically they are paid quarterly but just remember not all stocks pay a dividend.

All the stocks are not the same though. US stocks, for example, are so far the most diverse in the world. They come from a market of around 500 of the biggest companies in the world and not every single stock of these companies is the same. Each stock has a varied feature and different characteristics, which give the shareholders different kinds of benefits. A shareholder chooses his stock based on his capital, what kind of returns he expects, and on what tenure. So it is wise to know what kind of stocks are out in the market.

Domestic And International Stocks

You can categorise the stock based on the location. To distinguish them from each other most investors look at the location of the company and its official headquarters. It is important to understand that the stocks Geography category does not correspond to where the sales happen. For instance, a stock that you buy can have the company headquarter in the US but sell this product exclusively out of the country. You can see this in large multinational companies.

Growth And Value Stocks

A growth stock is a stock that has a high-risk level but at the same time a very attractive return. Growth stocks rise in demand among customers and the environment and are more interlinked with the long-term trend. And competition for this growth stock is highly intense in the market, and several times rivals disrupt the business. Investors who invest in growth stocks look for companies that have sales and profits rise tremendously quickly.

Value stocks, on the other hand, are a more conservative investment. They often show stocks already in the growth phase of the industry and take the leading space. There is not much room left to expand for them, and no new inventions are coming up. Yet, the risk involved in this stock is comparatively lesser than a growth stock. They are good choices for people who look for more price stability while setting some of the positives of exposure to stocks. Value investors search for companies whose shares are inexpensive. Value share is comparatively lower in price.

IPO stocks

IPO stocks are the companies that have recently gone public. They usually generate a lot of excitement among the investors who look to get to the bottom of a promising business concept. They are also highly volatile, especially when there is disagreement within the investment community about growth and profit. It remains private for a minimum of a year or as long as 2 to 4 years after it becomes public.

Dividend stocks

Dividend stocks or income stocks are the stocks that pay out forms of dividends. They are also referred to as shares of companies that are more mature businesses and have relatively few long-term opportunities for growth. An ideal conservative investor who needs to draw cash from an investment portfolio right away would be strongly choosing a dividend stock. An investor who would choose this stock would be and investors who have a low-risk tolerance or someone who is nearing their retirement phase and are looking out for a safe keeps out

Safe Stocks

These stock prices do not move fast or in a big amount. They are not affected by the overall market, and they come from Industries that do not get affected by the economic conditions. They offer paid dividends, and by that income can be set even during falling share prices during tough times. They are also known as low volatility stocks and operate in industries that are comparatively safer than the others.

Blue-chip stocks

These stocks come from the most reputed companies in the market. They come from companies that lead the industries. They do not provide a higher return but are known for their stability in the market. This feature makes them a favourite kind of stock for many investors. They have a high reputation in the market and hold a low-risk possibility. 

Penny stocks 

Penny stocks are contradictory to Blue chip stocks. They are highly inexpensive, of low quality, and come from companies whose stock prices are extremely low, typically less than a dollar per share. At the same time, they are highly dangerous in speculative Business models and prone to a scheme that can drain your entire investment. They are dangerous, but the benefit is that they are highly inexpensive, and you can easily afford them.

Conclusion

Portfolio diversification is a necessity if you want to be a good player in the stock market. You probably heard of portfolio diversification, it is very important to develop strong and stable investments. All of these stock classifications can plan for your diversity and investments across companies of different markets, geographies, and styles. You can have a well-balanced portfolio across various diversification and simultaneously raise money. Each stock has a different feature, and you have a wide choice to know which would best suit you.