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How to invest in Bitcoin

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How to invest in Bitcoin

Bitcoin is a cryptocurrency -a digital currency that exists only in virtual form and is not a physical currency. Bitcoin is the first cryptocurrency and was introduced in 2009. It uses the technology of cryptography to access and use the currency. Only a person who knows the key or code can use this currency, ensuring no one can access it without your permission. Bitcoins became popular a couple of years back with interest in them growing. Just like stocks, bitcoins are traded in exchanges.

The year 2017 was a landmark with bitcoins being traded at $20,000.  This was an all-time high. Since then it has come down and is trading at below $10,000. If you had invested in bitcoins when it started, you would have made a good profit on your investment. The problem with bitcoins is that many countries have banned it and trading is not allowed. It is a high-risk investment. Stocks are also risky, but the stock market is regulated. Bitcoin markets are not regulated and hence pose a higher risk.

This is a lucrative investment option and has the potential to earn huge returns. At the same time, the possibility of huge losses also exists. If you are willing to take a risk in return for big rewards, you can consider investing some money in bitcoins. Don’t invest more than 10% of your total investment in bitcoin. If you have decided to invest in bitcoin, here is a guide that will tell you all you want to know about the investing process.

Digital wallet

Real currency notes can be stored in a purse or wallet. A virtual currency like a bitcoin can be stored in a digital wallet. There are two kinds of wallets, namely hot wallet and cold wallet.

  1. Hot wallet: A hot wallet is where the bitcoin you purchase is stored on a cloud server. This can be easily accessed ensuring quick transactions. There are various websites that offer the facility of creating a hot wallet. Once you create a hot wallet, you can then link your bank account to the wallet. This allows you to transfer money and start buying bitcoins. You must note that hot wallets have been the target of hackers in the past.
  2. Cold wallet: This is a physical device using which you can access your bitcoins. You can create cold wallets using websites. Since the bitcoins are stored on the device, which is physically in your possession it is much more secure. The downside is that transactions on cold wallets take more time.

Cryptocurrency exchanges

Just as stocks are traded on a stock exchange, you can buy bitcoins on cryptocurrency exchanges. Since bitcoins are virtual currencies, the exchanges are also virtual and hosted on various websites. You can register at these cryptocurrency exchanges and start buying bitcoins. You may need to link your bank account, so that you can buy bitcoins from the exchange.

The exchanges charge a fee for the transactions you carry out. You can do some research online before deciding which exchange to use. You need to check if access to the exchange is allowed in your city/state/country.

Bitcoin ATMs

Bitcoin ATMs are just like the regular ATMs of banks where you can withdraw cash. A bitcoin ATM allows you to purchase bitcoins. You can easily search for Bitcoin ATMs that are near your location. In the ATM, you can connect to your wallet by using a QR code. You can then insert cash into the machine. The bitcoins are then purchased and transferred to your wallet. Each bitcoin ATM has its own procedure that you must be aware of before transacting.

Peer-to-peer

This method involves buying bitcoins from peers or other bitcoin owners. You can visit such peer-to-peer websites where you can find people who are ready to sell bitcoins. You would pay them money as per the applicable rate and the bitcoins would be transferred to your wallet by the seller. While dealing with individuals or meeting them privately, you need to exercise caution.

Buy stock instead of bitcoin

There is one more option to invest in bitcoin, which is buying stocks of a company that invests in bitcoin. This is an indirect way of investing in bitcoin. You can buy stocks in a trust or company that deals with bitcoins. Their stock price would usually be proportionate to the value of bitcoins. Since professionals do the buying and selling of bitcoins, your risk is reduced.

Systematic purchase of bitcoins

Just as you buy stocks and mutual funds regularly, you can use the same approach with bitcoins. You can setup regular withdrawal of money from your wallet to buy bitcoins. This helps you to beat the market. When the price of bitcoins is less, you can buy more of them. When the price goes up, the overall value of bitcoins you have increases.

Some things to keep in mind while investing in bitcoins

  • Bitcoins work on cryptography or the use of keys. It involves a public key, which is like your user ID. The private key is like a password that you use to transact. You need to safeguard the private key to ensure safety.
  • If you want to buy bitcoins anonymously, you must note that if you link your bank account, then eventually your purchases can be traced back to you by authorities.
  • You can buy bitcoins in part also. If 1 bitcoin costs 8,000 and you have only 4,000 in your account, then you can buy 0.5 bitcoins.
  • You need to track your bitcoin investment regularly, just like you track stocks. If prices are falling, you can consider selling to avoid big losses.
  • The bitcoin market is extremely volatile and is thus risky. If you cannot tolerate risk, it is best to keep out of this market.
  • If bitcoin prices rise to a high, you can sell your bitcoins in full or partially and then re-invest later when the prices come down. Failing to do this can make you lose the chances of making a profit.

Investing

Can Thematic Investing provide investors with growth opportunities in uncertain times?

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The impact of COVID-19 on the investment market

New whitepaper from CAMRADATA explores

CAMRADATA’s latest whitepaper on Thematic Investing, considers the role this type of investing can play in asset management and explores trends that can permeate society and traverse sectors. The whitepaper includes insights from guests who attended a virtual roundtable on Thematic Investing hosted by CAMRADATA in November, including representatives from CPR Asset Management, Sarasin & Partners, Impact Investing Institute, PwC, Quilter Cheviot, Scottish Widows and Stonehage Fleming.

Sean Thompson, Managing Director, CAMRADATA said, “In these seminal times, thematic investing has the potential to shape how the future unfolds. Yet running a successful thematic fund is no easy feat – it is a bit like navigating unchartered waters trying to identify the trends and the long-term opportunities.

“Trends such as AI and biotechnology are still in their relative early days, for example, and global economies are undergoing dramatic changes. But mapping out certain trends, identifying potential sustainable returns through a unifying thread that spans multiple sectors, could help future-proof investments. “Our roundtable guests considered current key themes, which themes worked well, and which have not and how thematic investors could identify trends with the potential to offer future growth.”

The guests named themes they currently like which included artificial intelligence, China, climate change, clean energy, automation, evolving consumption, ageing, digitalisation, water, waste management, biodiversity, and board diversity.

After discussing themes that have worked or not, the guests looked at total allocation to themed funds, and whether clients might be blinded by themes to the overall risk exposure in their portfolios.

Key takeaway points were:

  • Themes have a habit of coming and going. One guest recognised that automation and robotics, for example, were cyclical, which means that investors will have to think carefully about entry-points.
  • It was agreed that the commodities ‘super cycle’ of the 2000s came about with the economic development of China. Many commodities-based products found their way into mainstream investing, but this is unlikely to happen again.
  • One guest was surprised by some of the themes that interested their customers; with their research showing that Board Diversity was almost the lowest-ranking concern among the ESG choices they listed.
  • There was correlation between environmental impact and social benefits to investing. The theme that concerns the Impact Investing Institute, which is less than two years old, is improved measurement of such relationships.
  • In terms of successful themes, one clear winner due to COVID had been digitalisation.
  • One theme that has not done so well is the Ageing theme focused on older people travelling and enjoying experiences abroad later in life.
  • One guest said their firm used themes for ideas generation, not as a shortcut for portfolio construction. They said themes lead to good ideas, but they then spend at least three months researching a stock, so that the best themes are represented by the best investments.
  • The final point was that there are sensitivities for any global investor in allocating to themes, even the biggest one of all, Climate Change.
  • But on a positive note, one guest added if all stakeholders can resolve their differences on definitions such as impact and ethical investing, then more capital will be readily transferred into opportunities.

The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:

  • CPR Asset Management: ‘Central Banks: leading the path towards Impact Investing’
  • Sarasin & Partners: ‘Theme or fad? How to invest for the long term’

To download the Thematic Investing whitepaper, click here

For more information on CAMRADATA visit www.camradata.com

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Promises, Promises: Navigating the Reputational Risks of ESG Investment Pledges

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Why are people investing in music?

By Nir Kossovsky and Denise Williamee, Steel City Re

As the trend towards ESG investment and a low-carbon economy continues, banks are being backed into a reputational corner. Law firms specializing in representing the expanding pool of litigious shareholders are salivating.

On one hand, banks understand the inherent financial risks and challenges involved with making a wholesale move towards a low-carbon economy. The transition to a greener corporate world can’t happen overnight; as long as “brown” assets continue to be profitable, those in bank leadership positions have to balance their green aspirations with their responsibility to shareholders.

On the other hand, while not renewing loans on existing coal mines or fracking sites may improve a bank’s carbon disclosures, it could have social and financial ramifications that disappoint other stakeholders—i.e., causing people to lose their jobs. Still, financial institutions are experiencing pressure from all sides—from ESG investors to social license holders – to divest the fossil fuel industry and adopt drastic “green financing” practices now.

To alleviate these pressures, banks are pledging greener financing initiatives. Almost every large global bank has made some sort of commitment. Goldman Sachs, for example, announced they would spend $750 billion on sustainable finance over the next decade. Bank of America pledged $300 billion.

Bank boards and executives likely don’t fully appreciate the reputational risks posed by the aspirational statements they’re making. They are making promises and raising expectations without the operational or governance systems in place to ensure those expectations will actually be met. Overpromising and increasing the risk of angering and disappointing stakeholders is the very definition of reputational risk.

Banks are in a unique position: integral to every aspect of our economy, well-known brands that work hard to build and retain the trust of their customers and the general public while operating in an environment of intense scrutiny by politicians and regulators at every level of government. Satisfying all the stakeholders calling for greener policies while fulfilling their responsibility to their shareholders is a demanding balancing act fraught with risk. The Business Roundtable pledge, led by JP Morgan Chase CEO Jamie Dimon, and elevating employees, communities, and the environment as stakeholders, was an attempt to strike that balance. Already, though, that pledge is being dismissed by politicians like Senator Elizabeth Warren, who characterized it as an “empty publicity stunt.”

The price of missing expectations is costly, and bank executives and board members could find themselves in a legal hot seat. Federal securities lawsuit filings alleging reputation harm from missed expectations are up 60% over last year, the third year of a rising trend.

This trend stems from SEC regulation S-K that calls for more human capital disclosures, and the Caremark decision that sets the bar for most securities litigation and makes board oversight of mission-critical corporate operations a test of the duty of loyalty. Other cases, like In Re Signet, have made ESG-like pronouncements—historically “immaterial corporate puffery”—now potentially material in the securities arena.

For example, directors’ duty of loyalty were successfully questioned in alleged failures of innovation (In Re Clovis Oncology, Inc., board failure to protect the firm’s reputation for pharmacologic innovation); safety (Marchand v. Blue Bell Creameries, board failure to protect the company’s reputation for food safety); and environmental sustainability (Inter-Marketing Group USA, Inc. v. Armstrong, board failure to protect the firm’s reputation for oil pipeline-related environmental protection).

In other words, aspirational pledges are now being considered by courts with the full weight of a material public disclosure. As wealth managers chase ESG-informed investing and capital markets chase ‘green underwriting’, the plaintiff’s bar chases boards and executives making pledges that appear to be no more than aspirational marketing.

The only way to strike a balance and mitigate these risks is through a robust Enterprise Risk Management (ERM) strategy that’s centered around understanding who your key stakeholders are, what their interests are, and ultimately, what their expectations are. Coincidentally, it is also one of the three key behaviors the world’s largest asset management firm, Blackrock, is demanding of all investee companies in 2021 thus communicating the type of authenticity to its slogan “beyond investing,” that BP failed to accomplish with similar sloganeering a decade ago.

Banks need to create a central intelligence unit with board level oversight to comb through every aspect of the organization to identify stakeholder interests, potential risks and/or exposures. Pledges and communications should be informed by a rigorous and honest self-assessment of the institution’s public filings and operational capacity. Overpromising is costly. ESG pledges must be rooted in achievable goals that a bank’s leadership are confident their institutions can reasonably execute on an operational level. Banks also need to consider transferring or financing risks using the broad range of conventional and parametric insurance products currently available.

Enterprise risk management, when executed properly, will fulfill ESG commitments, reassure stakeholder groups and give marketers, counsel, and investment as well as government relations professionals an authentic story to tell about strong corporate governance. ERM focused on reputational intelligence will provide confidence to ESG funds, institutional investors, bond raters, and government officials alike.

The popularity of ESG investment and chasing ESG ratings is not going to go away, and stakeholder pressures will continue to mount. Investors doubled the size of the ESG sector this year, putting $27.4 billion into ETFs traded in U.S. markets. According to a recent survey conducted by Bank of America relating to ‘Gen Z’—which is just entering the workforce—80% take ESG into account when making their investment decisions.

Bank leadership that is striving to attain the correct balance between stakeholders and shareholders need to lean more into the “governance” portion of the ESG equation; pledges backed by enterprise risk management are the strongest pledges you can make.

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ESG – Bubble or Bandwagon?

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Portfolios that a daring young investor may choose

By Josh Gregory, Founder of Sugi

Isaac Newton was a successful investor, but he lost a fortune (£15m in today’s money) in the South Sea Bubble of 1720. When asked about his misadventure, he supposedly replied that he ‘could calculate the motions of the heavenly stars, but not the madness of people’ (presumably, himself included). 

The rise and fall of South Sea stock was one of the earliest and largest instances of a market bubble and crash. Three hundred years later, we’re facing another massive investing trend: sustainable investing. In the last year or so, almost every investment institution has jumped on the sustainability bandwagon. 

It’s now arguably more notable to find an asset manager who hasn’t committed to sustainable, ethical, responsible, impact and/or ESG (environmental, social and governance) investing than one who has. The numbers are telling: in August 2020, assets in global ESG exchange traded funds and products topped $100 billion (£73 billion) globally. 

Demand for sustainable investments has been bolstered by two main factors. Firstly, with climate change firmly on the global agenda and all eyes watching the Biden administration’s transition to power (and the subsequent climate change policy that will follow), ‘greening up’ has never been more of a priority for businesses and individuals. This includes the investment industry, with both retail and institutional investors increasingly demanding that their money has a positive impact on our planet. 

Secondly, since the start of the COVID-19 pandemic reports have continually claimed that ESG funds are outperforming ‘traditional’ investments. No longer is going green cited as a ‘nice to have’; rather, these reports demonstrate the value and resilience of ESG funds to the investor community, increasing demand. Surely, this can only be a good thing? Yes, but only if investors know what they’re buying. 

It’s no secret that ESG investing suffers from complexity, lack of transparency and a lack of any universal standard. Fundamentally, this is why we created Sugi – a new platform enabling retail investors to track the environmental impact of their investment portfolios using clear and objective carbon impact data. 

Josh Gregory

Josh Gregory

Today, ESG terms can lawfully be used to label pretty much anything. Ultimately, this means that the ESG label is not a guarantee of good practice. In fact, an ESG rating is a financial risk metric – the scores calculate the extent to which ESG issues affect a company’s economic value. Many investors, even institutional investors, don’t know how to decipher this. The scores themselves are designed to be used in tandem with portfolio dashboards and other data to make financial decisions. This effectively means that the scores on their own without any context are not of much use to anyone.

This has led to a glut of greenwashing in the sector, where investment products are described as green, ethical or sustainable, but the description is unsubstantiated. And while the top financial performance of ESG funds seems uncontroversial, those digging a little deeper may be surprised at what they find. Many ESG funds are heavily weighted in favour of technology companies, which typically have low carbon emissions. These stocks skyrocketed in 2020 but it’s important to note the context. It was largely due to the COVID-19 lockdowns and had nothing to do with the stocks’ ESG credentials. 

The EU, the UK and the US are all working on their own strict definitions of ESG. This should, in theory, go some way to clarify what investors are getting when they choose an ESG or sustainable investment product. However, this will take a while to implement and there will still not be a globally recognised definition or standard. 

It would seem many people are pouring money into investments when they don’t know what they’re buying. That’s nothing new. But underneath the ESG label lies something meaningful, worthwhile and, above all, valuable for the world in which we live – environmental, social and governance best practice.

The question remains though, is it a bubble? A bubble exists if ESG investments are over-valued (i.e. over-bought). Right now, ESG funds may be in bubble territory because many of the underlying stocks that make up the funds are themselves in a bubble. But does that make ESG a bubble? If it is, when do we call it? 

Historically, all bubbles –whether they be tulips, canals, railways or the internet – no-one knows. And if I knew now, I’d be sunning in the South Seas rather than writing this blog!

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