Have you been looking for an effective means to financially supplement your current business operations? Perhaps you are thinking about expanding and you require a fiscal “buffer” in the event that you experience any short-term disruptions. These are two situations which can be addressed by adopting a passive investment strategy. As opposed to “active” trading, a passive approach involves realising profits over time while mitigating the amount of risk associated with a given position. What options do you have and what do the experts have to say?
Stocks are arguably the most common form of investment. Their values are easy to follow and larger companies such as Microsoft or Apple are associated with high market capitalisations. However, many traders do not accrue profits through upward momentum alone. Larger firms provide their shareholders with healthy dividends on a regular basis. Barring a massive restructuring event, these dividends can be used to amass wealth in a completely predictable manner. Different organisations are naturally associated with different yields and still, these are excellent options to keep`in mind.
As their name suggests, index funds are “married” to the performance of a specific index such as the CAC 40 or the FTSE. The main benefit here is that bullish markets will provide extremely steady returns; sometimes for years on end. Another windfall is that unlike a single stock, the performance of an index is based off of the aggregate value of its total holdings. Therefore, knee-jerk reactions are much less common. If they do occur, you will likely observe preliminary warning signs as opposed to a sudden drop. The risk is therefore much more manageable and as opposed to monitoring a position on an hourly basis, index funds are generally associated with significantly less oversight.
The main advantage attributed to contracts for difference (CFDs) is that they exist independent of the conditions of the underlying market. To put this another way, they will not necessarily lose money if a sector suddenly drops in value. You can either “go long” to profit during a rising market or “go short” and sell a CFD when a market is falling. This is massively beneficial if you are concerned about the status of a marketplace; particularly in these volatile times.
The Benefits of Spread Betting
Predicting the value of a specific asset within a given period of time is another excellent idea. You will not have to physically own the asset, many profits will be exempt from taxation and above all, you can use margin trading to accrue even more wealth. There are literally thousands of underlying assets to choose from, so the chances are high that you will be able to accommodate your area of expertise. Still, be cautious of the inherent risks involved with spread betting. Wider margins and leveraged trades can also cause you to forfeit significant amounts of capital within a short period of time. This is the main reason why spread betting tends to be employed by those with prior experience.
These are several passive investment strategies which can prove to be worthwhile additions to your overall business model. When employed with prudence, the prospect of financial liquidity will become much more of a reality.