Over the past few years, growing economic turmoil across the world has compelled many individuals to reconsider their options when it comes to retirement planning. The earning class is constantly in search of options that not only enable us to secure our hard-earned money but also multiply the same for a good living, as not everyone is born with a silver spoon in their mouth.
Consider this. Do you make shopping lists before going to the supermarket? What about wish-lists for products you want but cannot afford at that exact moment? This is exactly the essence of financial planning – determining what you need and afford at a certain time and finding the most convenient way and time to purchase those items. Hence an efficient financial planning will allow you to find out the most convenient way and the right time to make acquisitions without ending with a big hole in your budget.
We can find different companies showing us ways to do so. Not that these companies are set up recently, but are present in the financial market for quite some time now.
Financial instruments come in all shapes and sizes and choosing the right place to entrust your money can be a mystifying task. However, with a little knowledge, anyone can become an investor and many individuals are turning towards fixed rate bonds as their preferred option when browsing high interest savings. Now the question is how and where can you invest this money? Well, there are many options/or safe havens one can find. There is an abundance of qualified financial planners/ firms in the market who can suggest you suitable ways to help you identify products which turn out to be a real cash cow for you in the long run.
There are ways of investment that may be risky (esp. stocks/shares/mutual funds) or non-risky stuffs- which is to safeguard oneself from huge financial sufferings.
As far as the risk factor is concerned (trading into stocks/shares), there are firms which promises to help manage the your(trader) portfolio while paying personal attention to the shares you buy, albeit suggest you the profitable shares to be bought by paying the required amount of commission for their services.
But the invention of internet has brought about many changes in the way we conduct our lives and our personal business. Since the invention of internet people have been able to do practically everything virtually. We can pay our bills online, shop online, bank online, and even date online!
Erstwhile era of trading involved cries across the floor of stock exchange to trade in paper shares. Thanks to modern advancements in mobile technology, Smartphone users can tap into a variety of mobile applications related to business news, industry information and financial market updates. Mobile trading applications have changed the way people think about trading and have empowered and encouraged more individuals to invest in the stock market.
Even the brokers have incorporated this technology to attract more clients and create more knowledge while trading. Most brokers and brokerage houses now offer online trading to their clients. Interestingly, online trading activity costs less, so that the client does not feel the pinch. Gone are the days when clients had to worry about the woes of losing the paper shares accidentally. Online trading, also known as direct access trading (DAT), has given anyone who has a computer, enough money to open an account and a reasonably good financial history, the ability to invest in the stock market. You don’t have to have a personal broker or a disposable fortune to do it, and most analysts agree that average people trading stock is no longer a sign of impending doom.
Now the trading in paper shares is replaced with Demat trading. Demat trading means the shares are held in electronic form with depositories. Demat trading is a prelude to online trading. Dematerialization of all shares has provided a platform for online trading and today online trading has spread its wings to futures /derivatives trading in stock market, investment in mutual funds, post office schemes, insurance applying for initial public offer (IPOs)and commodity trading.
Other advantages of Online trading includes:
- Fully automated trading process which is broker independent
- Informed decision making and access to advanced trading tools
- Traders/investors having direct control over their trading portfolio
- Traders’ ability to trade multiple markets and/or products
- Real time market data
- Faster trade execution
- Discount commission rates
- Low capital requirements
- High leverage offered by brokers for trading on margin
- Easy to open and manage account
- No geographical limits
But the question arises that “is online trading the safer alternative to regular paper-share trading?” Analysts seem to differ to this opinion. There are certain drawbacks to this mechanism as well.
- Need to activate speedy internet connection
- Online frauds by hackers.
- Non maintenance of secrecy for password by user leading to misuse.
- The requirement to fulfil specific activity and account minimum as demanded by the broker
- Greater risk if trades done extensively on margin
- Monthly software usage fees
- Chances of trading loss due to mechanical/platform failures
- Online traders are solely responsible for their trading decisions & cannot expect any personal assistance in the due course of online trading.
- The fee involved in trading varies considerably with broker, market, ECN and type of trading account and software.
- Some online brokers may also charge inactivity fees on traders.
For a newbie in stock trading, it is advisable to hire traditional brokers who can not only assist you with the right selection of stocks, but also listens to your requirements, answers your questions for a better understanding of the financial market.
Again, online trading is a beautiful thing which is easily accessible – but it isn’t for everyone. So, think carefully before you decide to do your trading online, and make sure that you really know what you are doing.
Economic recovery likely to prove a ‘stuttering’ affair
By Rupert Thompson, Chief Investment Officer at Kingswood
Equity markets continued their upward trend last week, with global equities gaining 1.2% in local currency terms. Beneath the surface, however, the recovery has been a choppy affair of late. China and the technology sector, the big outperformers year-to-date, retreated last week whereas the UK and Europe, the laggards so far this year, led the gains.
As for US equities, they have re-tested, but so far failed to break above, their post-Covid high in early June and their end-2019 level. The recent choppiness of markets is not that surprising given they are being buffeted by a whole series of conflicting forces.
Developments regarding Covid-19 as ever remain absolutely critical and it is a mixture of bad and good news at the moment. There have been reports of encouraging early trial results for a new treatment and potential vaccine but infection rates continue to climb in the US. Reopening has now been halted or reversed in states accounting for 80% of the population.
We are a long way away from a complete lockdown being re-imposed and these moves are not expected to throw the economy back into reverse. But they do emphasise that the economic recovery, not only in the US but also elsewhere, is likely to prove a ‘stuttering’ affair.
Indeed, the May GDP numbers in the UK undid some of the optimism which had been building recently. Rather than bouncing 5% m/m in May as had been expected, GDP rose a more meagre 1.8% and remains a massive 24.5% below its pre-Covid level in February.
Even in China, where the recovery is now well underway, there is room for some caution. GDP rose a larger than expected 11.5% q/q in the second quarter and regained all of its decline the previous quarter. However, the bounce back is being led by manufacturing and public sector investment, and the recovery in retail sales is proving much more hesitant.
China is not just a focus of attention at the moment because its economy is leading the global upturn but because of the increasing tensions with Hong Kong, the US and UK. UK telecoms companies have now been banned from using Huawei’s 5G equipment in the future and the US is talking of imposing restrictions on Tik Tok, the Chinese social media platform. While this escalation is not as yet a major problem, it is a potential source of market volatility and another, albeit as yet relatively small, unwelcome drag on the global economy.
Government support will be critical over coming months and longer if the global recovery is to be sustained. This week will be crucial in this respect for Europe and the US. The EU, at the time of writing, is still engaged in a marathon four-day summit, trying to reach an agreement on an economic recovery fund. As is almost always the case, a messy compromise will probably end up being hammered out.
An agreement will be positive but the difficulty in reaching it does highlight the underlying tensions in the EU which have far from gone away with the departure of the UK. Meanwhile in the US, the Democrats and Republicans will this week be engaged in their own battle over extending the government support schemes which would otherwise come to an end this month.
Most of these tensions and uncertainties are not going away any time soon. Markets face a choppy period over the summer and autumn with equities remaining at risk of a correction.
European trading firms begin coming to terms with the new normal
By Terry Ewin, Vice President EMEA, IPC
In recent weeks, the phrase ‘never let a good crisis go to waste’ has received a large amount of usage. Management consultancies, industry associations and organisations, including the Organisation for Economic Co-operation and Development (OECD) have all used it in order to discuss how the current crisis, caused by the Coronavirus pandemic, presents an opportunity for new and worthwhile change.
The saying is also commonly used to indicate that the destruction and damage that is caused by a crisis gives organisations the chance to rebuild, and to do things that would not have previously been possible. This has the potential to impact financial trading firms, where projects that this time last year would not have made much sense now appearing to be as clear as day. In Europe, banks and brokers alike are beginning to think about what life will look like post-pandemic, and how their technology strategies may need changing.
We can think of three distinct phases when it comes to a crisis. Firstly, there is the emergency phase. This is followed by the transition period before we come to the post-crisis period.
Starting with the emergency phases, this is when firms are in critical crisis management mode. Plans are activated to ensure business continuity, and banks and brokers work to ensure critical functions can still take place so as to continue servicing their clients. With regards to the current crisis period, both large and small European banks and brokers were able to handle this phase relatively well, partly due to the fact that communications technology has reached the point where productive Work From Home (WFH) strategies are in place. For example, cloud-connectivity, in addition to the use of soft turrets for trading, has enabled traders from across the continent to keep working throughout lockdown. From our work with clients, we know that they were able to make a relatively smooth transition to WFH operations.
In relation to the current coronavirus crisis, we are in the second phase – the transition period. This is the stage when financial companies begin figuring out how best to manage the worst effects of the ongoing crisis, whilst planning longer-term changes for a post-crisis world. One thing to note with this phase, is that no one knows how long it will last. There is still so much we don’t know about this virus. As such, this has an impact on when it will be safe for businesses to operate in a similar way to how they were run in a pre-pandemic world. But with restrictions across Europe starting to be eased, there is an expectation that companies will start to slowly work their way towards more on-site trading. For example, banks are starting to look at hybrid operations, whereby traders come in a couple of times a week, and WFH for the rest of the week. This will result in fewer people in the office building, which makes it easier to practise social distancing. It also means that there is a continued reliance on the technology that enables people to WFH effectively.
Finally, we have the post-crisis period. In terms of the current crisis, this stage is very unlikely to occur until a vaccine has been developed and distributed to the masses. Although COVID-19 has caused mass economic disruption, many analysts are predicting a strong rebound once the medical pieces of the puzzles are put into place. It may not be entirely V-shaped, but the resiliency displayed by the financial markets thus far suggests that it will be healthy.
Currently, many European trading firms are taking what could be described as a two-pronged approach.
The first part of this consists of planning for the possibility of an extension to phase two. Medical experts have suggested that there could be some seasonality to the virus, with the threat of a second wave of COVID-19 cases in the Autumn meaning that the risk of new restrictions remains. If this comes to fruition, there would be a need for organisations to fine-tune their current WFH strategies and measures, and for them to take greater advantage of the cloud so as to power communications apps.
The second component consists of firms starting to think about the long-term needs of their trading systems. Simply put, they are preparing themselves for the third phase.
It is in this last sense, that the idea of never letting ‘a good crisis go to waste’ resonates most clearly.
Currency movements and more: How Covid-19 has affected the financial markets
The COVID-19 pandemic has been more than a health crisis. With people forced to stay indoors and all but the most essential services stopped for multiple weeks, economies have suffered and financial markets have crashed. Perhaps the most public and spectacular fall from grace during the early stages of the pandemic was oil. With travel bans in place around the world and no one filling up at the pumps, the price of oil plummeted.
Prior to global lockdowns, US oil prices were trading at $18 per barrel. By mid-April, the value had dropped to -$38. The crash was not only a shocking demonstrating of COVID-19’s impact but the first time crude oil’s price had fallen below zero. A rebound was inevitable, and many traders were quick to take long positions, which meant futures prices remained high. However, with stocks piling up and demand sinking, trading prices suffered. Unsurprisingly, it’s not the only market that’s taken a knock since COVID-19 struck.
Financial Markets Fluctuate During Pandemic
Shares in major companies have dipped. The Institute for Fiscal Studies compiled a round-up of price movements for industries listed by the London Stock Exchange. Tourism and Leisure have seen share prices drop by more than 20%. Major airlines, including BA, EasyJet and Ryanair have all been forced to make redundancies in the wake of falling share prices. The automotive industry has also taken a knock, as have retailers, mining and the media. However, in among the dark, there have been some patches of light.
The forex market has been a mixed bag. As it always is, the US dollar has remained a strong investment option. With emerging markets feeling the strain, traders have poured their money into traditionally strong currency pairs like EUR/USD. Looking at the data, IG’s EUR/USD price charts show a sharp drop in mid-March from 1.14 to 1.07. However, after the initial shock of COVID-19 lockdowns, the currency pair has steadily increased in value back up to 1.12 (June 25, 2020). The dominance of the dollar has been seen as a cause for concern among some financial experts. In essence, the crisis has highlighted the world’s reliance on it.
Currency Movements Divide Economies
In any walk of life, a single point of authority is dangerous. Indeed, if reliance turns into overreliance, it can cause a supply issue (not enough dollars to go around. More significantly, it could cause a power shift that gives the US too much control over economic policies in other countries. Fortunately, other currencies have performed well during the pandemic. Alongside USD and EUR, the GBP has also shown a degree of strength throughout the crisis. However, these positive movements haven’t been shared by all currencies.
The South African rand took a 32% hit during the early stages of the pandemic, while the Mexican peso and Brazilian real dropped 24% and 23%, respectively. Like the forex market, other sectors have experienced contrasting fortunes. Yes, shares in airlines and automotive manufacturers have fallen, but food and drug retailers have seen stocks rise. In fact, at one point, orange juice was the top performer across multiple indices. With the health benefits of vitamin C a hot topic, futures prices for orange juice jump up by 30%. The sudden surge had analysts predicting 60% gains as we move into a post-COVID-19 world.
Looking Towards the Future through Financial Markets
The future is always unknown and, due to COVID-19, it’s more uncertain than ever. However, the financial markets do provide an indication of how things may change. The performance of USD and EUR in the forex markets suggest there could be a lot more trade deals negotiated between the US and Europe. The surge in orange juice futures suggest that health and wellness will become a much more important part of our lives. Even though it was already a multi-billion-dollar industry, the realisation that a virus can alter the face of humanity has given more people pause for thought.
Then, of course, there’s the move towards remote working and socially distance entertainment. From Zoom to Slack, more people will be working and playing from home in the coming years. The world is always changing, but recent have events have made us appreciate this fact more than ever. The financial markets aren’t a crystal ball, but they can offer a glimpse into what we can expect in a post-COVID-19 world.
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