As we gradually put the spectre of coronavirus behind us, the one thing that has undoubtedly defined the post-pandemic era is the huge proliferation of retail traders and investors in financial markets. Indeed, in terms of sheer quantities, the number of ordinary people moving into a wide variety of financial instruments is nothing short of unprecedented. To put things into perspective, Citadel Securities estimates that retail players now account for around 25 percent of the total stock market. In developing markets, however, these figures are even higher.
While this impressive growth in equities is definitely noteworthy, the undisputed leader in terms of attracting new capital has been cryptocurrencies. Following a whirlwind 2021 that saw them hit previously unimaginable all-time highs, cryptocurrencies have enjoyed newfound popularity among institutional and retail investors alike.
Looking at the current economic climate, it’s only natural that an ever-increasing number of Joe and Jane Bloggs would be more willing to entertain risk-on options. With inflation now in the double digits and savings accounts rates effectively in negative territory, the lure of massive gains in the stock and crypto markets is very strong. In fact, it would seem that even the most conservative of savers have been tempted by the huge returns these markets have generated in recent years. In this article, we’ll be looking at what is behind the hype encircling the financial markets right now, along with methods of maximising one’s potential returns as a trader or investor.
Forget the past
Proper financial planning and saving money have been inextricably linked for decades, but the new age of near-zero interest rates ushered in after the Great Financial Crisis of 2008 had already begun to challenge that paradigm. Fast forward to 2022, and virtually all the major currencies are now in the grip of very high inflation. As a result, holding cash savings for the long term has become nothing short of financially ruinous. If we look at things in the wider context, consumer prices for everyday items are rising at a rate of at least 10 percent. Meanwhile, even the most attractive savings accounts are paying a maximum of two percent per annum on deposits. Viewed through this prism, you don’t need to be a qualified public accountant to work out that your total wealth is actually shrinking by more than eight percent each year.
It’s no secret that some of the biggest returns one can make come from long-term investing
In contrast to the amazing returns seen in the stock market last year, the increasing draw of financial instruments is self-evident, even after allowing for the gains wiped off by the significant correction we have seen since the Fed started to tighten its monetary policy. No doubt, many of the new entrants to the stock market were somewhat hesitant at first, but now they are purchasing ETFs, indices and even individual equities with impressive confidence. While the US regulator is definitely trying to bring inflation under control, it could take many months and several rate hikes to achieve. Until then, securities will remain an indispensable part of any working-age person’s portfolio.
The digital switchover 2.0
If you have been casting even a passing eye at the financial markets over the past two years, you will have surely seen the extent of the hype around crypto. This fledgling-no-more asset class made headlines in 2021 for rocket-fuelled growth, increased utility and widespread adoption.
Naturally, this market has been far more volatile in its swings than stocks have. As a result, gains have been far more spectacular. However, the flip side of this is much greater uncertainty. For example, despite being up over 90 percent at one point this year, BTC is currently down over 40 percent from this recent all-time high. Nonetheless, now that many institutional investors are more or less sold on the need for crypto allocations, we can safely expect multiple growth cycles to come for this still relatively young instrument class. In fact, despite this current downtrend, many large pension plans, including the Houston Firefighters’ Relief and Retirement Fund, are actively buying up digital currencies.
The other key attraction of crypto is its utility, including as a store of value. In spite of cryptocurrencies’ inherent volatility, many people still tout them as potential hedges against inflation. This perception is thus seeing increasing numbers of people adding bitcoin and other non-inflationary cryptocurrencies to their portfolios in line with typical gold allocations. The utility of digital currencies and the blockchain in general is even gaining traction in the upper echelons of government, as a raft of nations prepare to release their own central bank digital currencies (CBDCs), which are basically digital versions of their existing fiat currencies. Until government-backed stablecoins go live, there are, of course, various private algorithmic stablecoin projects like Terra and Tron that offer a quick and easy way to buy and hold US dollars.
Beware, though: there are still a lot of scammers operating in this largely unregulated space, and you would do well to seek out a reputable broker like Libertex, which has a user-friendly app that enables you to trade your crypto CFDs from any device.
Sorting the wheat from the chaff
As trading and investing have gained in popularity over recent years, the retail market has become inundated with a plethora of firms offering financial and brokerage services. Sadly, not all of them are as reputable as you might expect, and your choice of broker can therefore make a huge difference to your potential returns. Libertex offers commission-free crypto CFD trading, which means its users only pay the spread (the difference between bid and ask price) when buying or selling digital currencies on the Libertex platform. By way of contrast, many of its competitors will charge transaction, exchange and commission fees on every single purchase or sale of cryptocurrencies.
Naturally, the impact of these practices is exponential and can ultimately reduce the funds that are used for investing by a significant margin. What’s more, since many new crypto investors are predominantly holders of stocks or other more traditional instruments, Libertex provides the added comfort and convenience of enabling users to store their entire portfolio in one easily accessible location. Libertex has been connecting ordinary people with a whole host of different financial markets for almost 25 years now and is able to consolidate all your holdings in its user-friendly, multi-award-winning mobile or desktop app.
Diversification in all things
We all know how exhilarating and exciting short-term trading can be. The hands-on action involved in frantically changing pending orders, the rush of seeing price changes in real time. But all of that comes at the cost of exponentially higher risk. It’s no secret that some of the biggest returns one can make come from long-term investing.
Libertex recognises this reality and wants to build sustainable and mutually beneficial relationships with its clients. It was with this goal in mind that the company created its Libertex Invest account type. Libertex Invest enables users to make long-term purchases of stocks, completely reducing any additional charges except purchasing the actual shares. That means there are no transaction fees, commission or other hidden costs. Clients can even receive dividends on their stock holdings. This means you can buy and hold blue-chip stocks like Microsoft, Apple and Tesla or even indices like the S&P 500 or Nasdaq under some of the best possible conditions in the industry.
Even the most dedicated traders have to admit that it’s always smart to have at least some of your eggs in a lower-risk basket, just in case. This being the case, the brand-new Libertex Invest product now means you can keep your active trading and passive investment portfolios both totally separate and yet conveniently interlinked while still enjoying the best possible terms for each account type.