By Shahid Munir, co-founder of MintedTM, an investment platform which allows individuals to buy and sell gold bullion.
2020 has forced a lot of changes, especially where personal finances are concerned; attitudes towards investment have shifted and financial security has taken priority. Knowing that high-risk investments won’t guarantee profit, individual investors are considering longer-term alternatives and opportunities to save. So, at a time when stock markets are volatile, where should individuals be investing their money for the best returns?
While no one could have predicted the coronavirus crisis or the widespread economic devastation that has come with it, tension has been growing across global marketplaces for some time. Back in 2018, there were talks of a financial crisis and, even before the pandemic, unsecured debt hit a new peak of £14,540 on average per household. Now, with the UK entering into the deepest recession on record, unemployment climbing, and government support dwindling, the true value of quick-access ‘emergency’ funds has come to the fore.
Whether it’s a failed MOT, a broken boiler, or redundancy, in the event of a financial emergency, individuals are less likely to have the time or inclination to research the options available; many may resort to quick-fixes such as a high-interest payday loans to get themselves out of a difficult situation. According to research from Which?, 30 percent of people earning up to £28,000 a year were unable to save during lockdown. However, as recovery gets under way, it’s clear putting money aside to cover any large, unforeseen expenses can help to preserve existing finances and keep stress to a minimum.
Despite there being plenty of investment options available, very few lend themselves to building an emergency fund. With government premium bonds currently yielding virtually nothing and interest rates on cash ISAs sitting far below inflation, what was once considered safe is not only under-performing but is costing investors money in the long run. To reduce risk, investors should be diversifying their portfolios and investing in cryptocurrency or physical assets such as gold. For example, gold Exchange Traded Funds (ETFs) are popular with some individuals because they provide an easy way of gaining exposure to any increases in the precious metal’s value, while still allowing easy access to the funds if they are needed
With new types of technology platforms offering easy-to-use mobile savings apps, individuals can look further than traditional ISAs and bonds and begin to start investing in precious metals, something that may not have seemed possible in the past. Being based on an average rate of return and outperforming inflation, gold isn’t just a safe haven risk-off asset, it’s a key step towards establishing a watertight emergency fund.
While many people are looking for innovative ways to maximise saving potential, it doesn’t have to be complicated. Often, taking a step back and considering both personal and financial objectives can work wonders. This may involve analysing personal expenditure, taking stock of any outgoings and gauging their appetite for risk. It is wise to work towards building an emergency fund that covers three to six months’ worth of bills and expenses or to save around 10 percent of an annual salary.
Treating an emergency fund like any other fixed cost on pay day and separating it from day-to-day bank accounts and transactions will make it easier to commit to investing. For example, taking advantage of any platform-specific features, such as setting up a minimum standing order, can take the pressure off investing a lump sum. Often, it’s easier to reach an end goal by saving smaller, regular amounts, and topping them up where possible – autosaving apps are a perfect example of how these costs can add up over time.
Kickstarting an emergency savings fund is one of the first steps investors can take towards financial health, future planning and getting out of any debt cycles. While gut instinct may tempt people to keep money in the bank, investment in physical assets, such as gold, offers individuals the opportunity to benefit from greater returns and peace of mind, providing that all-important safety net for whatever the future may hold.
Not company earnings, not data but vaccines now steering investor sentiment
By Marc Jones and Dhara Ranasinghe
LONDON (Reuters) – Forget economic data releases and corporate trading statements — vaccine rollout progress is what fund managers and analysts are watching to gauge which markets may recover quickest from the COVID-19 devastation and to guide their investment decisions.
Consensus is for world economic growth to rebound this year above 5%, while Refinitiv I/B/E/S forecasts that 2021 earnings will expand 38% and 21% in Europe and the United States respectively.
Yet those projections and investment themes hinge almost entirely on how quickly inoculation campaigns progress; new COVID-19 strains and fresh lockdown extensions make official data releases and company profit-loss statements hopelessly out of date for anyone who uses them to guide investment decisions.
“The vaccine race remains the major wild card here. It will shape the outlook and perceptions of global growth leadership in 2021,” said Mark McCormick, head of currency strategy at TD Securities.
“While vaccines could reinforce a more synchronized recovery in the second half (2021), the early numbers reinforce the shifting fundamental between the United States, euro zone and others.”
The question is which country will be first to vaccinate 60%-70% of its population — the threshold generally seen as conferring herd immunity, where factories, bars and hotels can safely reopen. Delays could necessitate more stimulus from governments and central banks.
Patchy vaccine progress has forced some to push back initial estimates of when herd immunity could be reached. Deutsche Bank says late autumn is now more realistic than summer, though it expects the northern hemisphere spring to be a turning point, with 20%-25% of people vaccinated and restrictions slowly being lifted.
But race winners are already becoming evident, above all Israel, where a speedy immunisation campaign has brought a torrent of investment into its markets and pushed the shekel to quarter-century highs.
(Graphic: Vaccinations per 100 people by country, https://fingfx.thomsonreuters.com/gfx/mkt/azgvolalapd/Pasted%20image%201611247476583.png)
SHOT IN THE ARM
Others such as South Africa and Brazil, slower to get off the ground, have been punished by markets.
Britain’s pound meanwhile is at eight-month highs versus the euro which analysts attribute partly to better vaccination prospects; about 5 million people have had their first shot with numbers doubling in the past week.
Shamik Dhar, chief economist at BNY Mellon Investment Management expects double-digit GDP bouncebacks in Britain and the United States but noted sluggish euro zone progress.
“It is harder in the euro zone, the outlook is a bit more cloudy there as it looks like it will take longer to get herd immunity (due to slower vaccine programmes),” he added.
The euro bloc currently lags the likes of Britain and Israel in terms of per capita coverage, leading Germany to extend a hard lockdown until Feb. 14, while France and Netherlands are moving to impose night-time curfews.
Jack Allen-Reynolds, senior European economist at Capital Economics, said the slow vaccine progress and lockdowns had led him to revise down his euro zone 2021 GDP forecasts by a whole percentage point to 4%.
“We assume GDP gets back to pre-pandemic levels around 2022…the general story is that we think the euro zone will recover more slowly than US and UK.”
The United States, which started vaccinating its population last month, is also ahead of most other major economies with its vaccination rollout running at a rate of about 5 per 100.
Deutsche said at current rates 70 million Americans would have been immunised around April, the threshold for protecting the most vulnerable.
Some such as Eric Baurmeister, head of emerging markets fixed income at Morgan Stanley Investment Management, highlight risks to the vaccine trade, noting that markets appear to have more or less priced normality being restored, leaving room for disappointment.
Broadly though the view is that eventually consumers will channel pent-up savings into travel, shopping and entertainment, against a backdrop of abundant stimulus. In the meantime, investors are just trying to capture market moves when lockdowns are eased, said Hans Peterson global head of asset allocation at SEB Investment Management.
“All (market) moves depend now on the lower pace of infections,” Peterson said. “If that reverts, we have to go back to investing in the FAANGS (U.S. tech stocks) for good or for bad.”
(GRAPHIC: Renewed surge in COVID-19 across Europe – https://fingfx.thomsonreuters.com/gfx/mkt/xegvbejqwpq/COVID2101.PNG)
(Reporting by Dhara Ranasinghe and Marc Jones; Additional reporting by Karin Strohecker; Writing by Sujata Rao; Editing by Hugh Lawson)
BlackRock to add bitcoin as eligible investment to two funds
By David Randall
(Reuters) – BlackRock Inc, the world’s largest asset manager, is adding bitcoin futures as an eligible investment to two funds, a company filing showed.
The company said it could use bitcoin derivatives for its funds BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc.
The funds will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission on Wednesday.
A BlackRock representative declined to comment beyond the filings when contacted by Reuters.
Earlier this month, Bitcoin, the world’s most popular cryptocurrency, hit a record high of $40,000, rallying more than 900% from a low in March and having only just breached $20,000 in mid-December.
Bitcoin tumbled 10.6% in midday U.S. trading Thursday.
Other U.S.-based asset managers will likely follow BlackRock’s lead and add exposure to bitcoin in some form to their go-anywhere or macro strategies as the cryptocurrency market becomes more liquid and developed, said Todd Rosenbluth, director of mutual fund research at CFRA.
“It’s easy to see how strong the performance has been of late and look at a historical asset allocation strategy that would have included a slice of crypto and how returns would have been enhanced as a result,” he said. “Large institutional investors are going to be able to tap into the futures market in a way that a retail investor could not do.”
There is currently no U.S.-based exchange-traded fund that owns bitcoin, limiting the ability of most fund managers to own the cryptocurrency in their portfolios.
BlackRock Chief Executive Officer Larry Fink had said at the Council of Foreign Relations in December that bitcoin is seeing giant moves every day and could possibly evolve into a global market. (https://bit.ly/2XXFHrB)
(Reporting by David Randall; Additional reporting by Radhika Anilkumar and Bhargav Acharya in Bengaluru; Editing by Arun Koyyur and Lisa Shumaker)
Bitcoin slumps 10% as pullback from record continues
LONDON (Reuters) – Bitcoin slumped 10% on Thursday to a 10-day low of $31,977 as the world’s most popular cryptocurrency continued to retreat from the $42,000 record high hit on Jan. 8.
The pullback came amid growing concerns that bitcoin is one of a number of financial bubbles threatening the overall stability of global markets.
Fears that U.S. President Joe Biden’s administration could attempt to regulate cryptocurrencies have also weighed, traders said.
(Reporting by Julien Ponthus; editing by Tom Wilson)
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