Investing is a style of trading when the positions are held for a very long time from several weeks up to months or even years. A very little time is spent on trading analysis and position monitoring so an investor may be busy with his other life priorities. The main idea behind the investment approach is to put the money to work and make even more money that has been invested with less time and skills resources required to succeed.
It is a known fact that in countries like the USA up to 80% of people are investing their money and it leads to a really strong source of income after some period of time. The most famous investor is Warren Buffet that has started his career from 10,000 USD and now is a world-wide known multi-billionaire.
Assets for investing
After choosing investment as a trading style, the next step is to select the assets or at least the asset classes to invest in. There are more or less suitable instruments that can statistically higher chances to generate higher income than others.
Stocks. The most popular and well-known asset type that is used by millions of people. A higher chance of success in stock investing exists because it is a famous fact that stocks tend to grow most of the time rather than to fall down. There are many investment firms and pension funds that are allowed to open only long positions (buy) which leads to price growth. In our broker’s reviews, one of the aspects that are analyzed is the asset types offered for trading, and brokers like eToro or Forex.com have 12,000 and 4,500 instruments respectively, the biggest part of which are stocks.
Indices. The asset class represents a stock group that makes up the index. It is computed from the prices of selected stocks by a certain measure. For example, the most famous S&P500 index consists of the 500 largest by capitalization stocks in the USA. Almost all the brokers have such indices like NASDAQ, FTSE, CAC40, Dow Jones, Nikkei, and others so it is possible to invest in indices of various countries.
Commodities. Among this type of asset, there are well-known instruments like Gold, Silver, Wheat, Copper, and others. During high volatility periods like a crisis, war, pandemics like COVID-19 or a similar one, assets like Gold and Silver are treated as a so-called ‘safe-haven’ and investors tend to buy them to eliminate the risks. Instruments like Wheat, Sugar, Copper, Cotton, and others have seasonality factors that last for several months and are also popular for investments.
Forex currencies. A bit less popular for investing though still suitable for it because of swap rates and higher leverage available. There exist tens of trading pairs that allow generating a certain income out of holding positions for a long period of time. For example, after the huge drop in January 2015 on the EUR/CHF pair the investors that opened buy positions and held it at least for a couple of months could have made 10% even without using leverage.
Cryptocurrencies. A certainly new but already popular assets type that allows generating huge incomes. Many people have become millionaires because they have invested in cryptocurrencies at the proper time and fixed their profits in a suitable period. High volatility and lower capitalization in comparison to other asset classes make it a bit riskier but at the same time more profitable and by the end of 2020 there have already been many big funds, banks, and other financial institutions that have publicly revealed that they have some of their assets invested in Bitcoin and other cryptocurrencies.
Choosing a proper broker
When a trader decided to invest, a broker should be chosen with a very smart and comprehensive approach. Before placing money with someone, a must thing to do is to have a look at our brokers reviews where are located complex and full overviews of the brokers. Here are the key aspects that are put under analysis in the reviews:
- Regulation– It is obligatory for a broker to be regulated. A licensed broker is obliged by law and entity that has provided him a license to protect the financial interests of every single client and not to act against a trader.
- Trading fees – This point is usually not taken into account which is fairly a mistake because swaps, being a part of trading costs, may turn a profitable position into a losing one, especially when leverage is used.
- Trading Platforms – Even if less time is spent in front of the monitor during investing in comparison to day trading or scalping, but still a broker has to have several trading platforms to offer to traders. They should have a certain level of usability, have built-in indicators and tools, have a modern design and other features.
- Markets and Instruments – As mentioned above, the trader might want to invest in several asset classes that is why it is obligatory for a broker to offer as many instruments as possible. Forex pairs, CFD stocks, and indices, commodities and energies, metals, and cryptocurrencies must be in the list.
- Support – From time to time, there might occur questions that could be resolved only with the help of the broker that is why it is important to analyze the responsiveness, variety of contact methods, and other factors that allow granting support service a high rating.