The ways and instruments of making money that were offered by trading courses in the recent past no longer show the necessary efficiency. But this does not mean that you have to give up the idea of profitable investments. You just need to change your approach to education and to the use of strategies in financial markets.
What has changed in the world of investing?
The value of any asset is primarily a balance between supply and demand. At the end of 2021 major economists predicted serious turbulence in the currency and stock markets. The reason is very simple – a coronavirus infection. More specifically, the reaction of financial institutions to this crisis. The Fed (the US Federal Reserve System), in order to stimulate business, poured trillions of dollars into the economy during its policy of qualitative and quantitative easing. Thus, every month the Fed bought bonds totaling 120 billion. Naturally, this led to an explosive growth of the stock market. At 0-0.25% interest rates, almost any investment brought investors substantial returns.The problem is that if you constantly pour free money into the economy, it leads to skyrocketing inflation, meaning that over time the same money begins to depreciate. Which is exactly what happened, inflation in the U.S. at the end of 2021 rose to its highest level in 30 years. The last time it reached 6.2% per year was in 1990. That is, the investor finds himself in a situation of turbulence in which the inevitable future rollback of the bond buying program and interest rate increases are guaranteed to lead to shifts in the stock and foreign exchange markets. Everyone is faced with the question – how to invest money and earn in an era of uncertainty? The Fed is not the only one who pursued a policy of injecting a massive crisis with money. European Central Bank, central banks of Australia, Japan, Canada and many other countries behaved similarly. Despite the apparent strength, serious problems are called in the economy of China. The amount of debt of Chinese enterprises is at an all-time high; it is 260 percent of Japan’s GDP. This is even more than the national debt of the United States. The situation seems critical for the investor, but do not jump to conclusions.
Stocks, bonds, precious metals
In the current environment, a traditional portfolio can be completely frustrating for the novice investor. In May 2022, the Fed raised the benchmark interest rate by 50 points at once, to 0.75-1%. The natural reaction was a drop in the markets. The Dow Jones index fell almost 12% in 2022, and the Nasdaq Composite showed a 26% decline. In total, the capitalization of U.S. companies fell by $11 trillion. Investors who took trading courses were able to anticipate such developments and protect their trading accounts. But all those who were able to preserve their capital during such uncertain times face the question – what to do next, where to direct investments?
What awaits the share market?
Theoretically, there is hope that the stock market will rebound after such a collapse. Some people think there is an opportunity to invest income in the most attractive sectors – energy, finance and digital technology. The problem is that it’s too early to talk about a trend change. Yes, the Fed has already started to raise rates, large participants no longer have access to liquidity in U.S. dollars. But the European Central Bank is still pursuing a fairly soft policy, the ECB’s key rate remains at 0%. But inflation in the Eurozone in the second quarter of 2022 was 7.5%, the highest in the history of the European Union. Consequently, sooner or later, the regulator will have to address this issue. Which will naturally lead to further collapse on the stock market. So buying almost any stock is now a risky move. When the markets crash again, everybody suffers.
How are things with Bonds?
Is it worth investing in bonds these days? It’s not uncommon for newcomers to be encouraged to invest in bonds as a source of passive income. These securities do offer good returns over the years. The problem is that the collapse of the stock markets is extremely detrimental to the financial performance of businesses. Banks lend to businesses against securities. If a stock falls, there is an increased risk of default. Naturally, not all companies will be among the victims. On the contrary, some will benefit from this situation, because the business will have to attract investments at higher interest rates. But it is impossible to predict how things will develop and the situation will change very quickly. Waiting does not make sense either, you need to earn here and now.
Is it worth investing in precious metals?
Gold and silver, platinum and palladium have always been considered attractive assets to buy in times of crisis. But the current situation has a certain exclusivity. It is that there is simply less available money in the market. Certainly, the reserve assets will be in some demand. It is an excellent tool for hedging. Moreover, it perfectly approaches for short-term trading. You just need to look at the chart of the Gold instrument in any trading platform. One year ago, a troy ounce of gold was worth approximately $1,850. Today, the same volume is worth less than $1,700. That is, investing in it today would not save money, let alone make money. At the same time, during this period, if you switch from an investment strategy to a more short-term strategy, trading, you could make quite a bit of decent money.
Cryptocurrency
Many experts predicted a rapid growth of the cryptocurrency market during the future financial crisis. But the reality did not coincide with predictions. Contrary to all expectations, bitcoin fell from 47,000 to 29,000. The same situation happened with other coins, for example ETH/USD fell from 3900 to 1700 per token. But you can’t say that it was impossible to foresee this nuance during your trading training. Capital Management Academy experts have always warned that cryptocurrencies have their own peculiarities, and it is an extremely challenging market. If there were a classic crisis right now, like 2008, we could see bitcoin at 100,000 or even higher.
In fact, this crisis is simply bringing the global economy into a state of equilibrium. The bubble that was designed to get through the pandemic period with minimal loss to the real economy is deflating. Students who have been trained in stock market trading are well aware of the cause and consequences of this situation. At this stage, buying cryptocurrency no longer has the potential of past years. There is a possibility that bitcoin and other coins can recover their value. Practice has shown – during the crisis, investing in tokens did not become a lifeline.
Earnings Today
Many financiers were quite dismissive of short-term trading strategies, calling them risky and speculative. But now the market is down by nearly a quarter, and a number of leading experts predict no lesser decline in the near future. In such cases, the accuracy of long-term forecasts is greatly reduced. Even the world’s leading analysts do not risk describing the development of the situation in the next few years. But if you lower the planning horizon, the picture starts to look very interesting. Almost all trading platforms have a large set of tools for technical analysis. In the short-term and medium-term perspective their accuracy is quite enough. Of course, global economic events will influence the quotes. However, technical analysis has proved itself perfectly, this tool allows you to assemble a portfolio with a good level of profitability and plan your bets and decisions, and you should definitely not make blind bets as in roulette in an online casino. The difference is that forex investing works with a much shorter time frame. It’s worth remembering that the price of gold has remained virtually unchanged over the past year. But during this year it showed serious ups and downs. Therefore, long-term investors have earned nothing, unlike forex traders. The question is which financial instrument to choose for trading in 2022 and even 2023. Now forex dealers offer a wide range of instruments, which greatly expands the range of possibilities. During the seminars, the Money Management Academy makes it possible to understand the peculiarities of each asset, to test the possibilities to earn without own investments on the trading terminal. Thanks to that the choice of asset for trading becomes second-rate. If there is volatility in the market and if the charts show predictable dynamics, then the question, “Where to invest money?” is pushed into the background. It is possible to receive a decent income on currency pairs, futures, cryptocurrency. Moreover, a beginner does not need to have deep knowledge in finance. Much more important is the ability to create a profitable strategy, master risk management techniques, and correctly use technical analysis tools.